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Role of Financial Institutions in an economy

Saving and investment play a major role in the growth of the economy.  All societies depend on individual and business saving and investment to provide the capital (start up money) needed to begin, expand, and modify businesses in the private sector.  Only with the growth of businesses can increased consumer demands be met.  As the money circulates in an economy, the act of saving and investing is essential to healthy economic growth.  Individuals that own the resources, sell the resources and use the income to purchase products or save or invest.  The act of saving and investing provides the resources for producers to make products that are sold to individuals and make profits for themselves which they either use to buy more resources or save or invest.

In the public sector, government uses tax revenues to provide public goods and services

The U.S. Treasury Department

The Federal Reserve


This page last updated on 06/07/00.

Dr. Cynthia Sparks is the Supervisor of Social Studies for Chesapeake Public Schools.  She is also an Adjunct Faculty member for the University of Virginia, Troy State University, and Old Dominion University.