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Complexities of the U.S. Financial System: The United States financial system has several complexities, and it is impacted by various environmental factors such as the economy and federal regulations. Some of the major components in the U.S. financial system include financial markets and the U.S. Federal Reserve. As one of the major elements of the U.S. financial system, financial markets have considerable impacts on the economy, businesses, and individuals. Financial markets can basically be described as platforms where companies in an economy access capital to expand or hedge their risks. Generally, these markets help to efficiently guide the flow of investments and savings in the economy is a manner that promotes the collection of capital and the production of goods and/or services. The U.S. financial markets have considerable effects on the economy because they provide platforms through which companies generate cash for growth, lessen risks, and investors make money (Amadeo, n.d.). For instance, the U.S. stock market impacts the economy when companies increase their earnings and investors make profits, which keeps the economy growing. In addition, the U.S. financial markets impact businesses though creating a fair and regulated system for businesses to accumulate huge capital for growth. One of the major ways in which this occurs is through the stock and bond markets. In this case, the financial markets allow businesses to offset risk with commodities and contracts on foreign exchange futures. With regards to the impact of financial markets on individuals, one of the ways is through investment in the stock market. People invest in stocks and may make profits or losses based on the existing market risks. The othe... ... middle of paper ... ...e, when the Federal Reserve Board increases interest rates, consumers lessen their spending because they don’t have much disposable income (Seabury, 2011). On the other hand, the influence of interest rates on global financial environment is related to the effect these rates have on inflation and recessions. This primarily occurs through federal funds rate, which is the rate that banks use to lend money from each other when interest rates rise or fall. An increase or decrease in interest rates contributes to inflation, which can result in considerable loss of purchasing power and affect the global financial environment. The considerable loss of purchasing power leads to recession because of downturn in economic activity. For example, the 2008 global financial crisis was brought by a downturn in economic activity because of the bursting of the US housing bubble.

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