Final answer:
The Monetary Authority of Sri Lanka is the Central Bank of Sri Lanka, which oversees the country's financial system. International trade involves the exchange of goods and services between countries, and money must have a limited supply to maintain value. Financial institutions bridge savers and borrowers, influencing capital formation and the allocation of savings based on interest and risk.
Step-by-step explanation:
Understanding Financial Terms and Institutions
The Monetary Authority of Sri Lanka refers to the Central Bank of Sri Lanka, which is the key financial institution responsible for managing the country's currency and monetary policy. It differs from other financial institutions such as commercial banks, which among other things maintain deposit accounts and facilitate day-to-day financial transactions like the maintenance of current accounts and foreign exchange transactions.
Trading activities between countries is known as international trade, which involves the exchange of goods and services across borders. This is distinct from domestic trade, which occurs within a country's borders. The concept of 'scarcity of money' implies that money must have a limited supply to maintain its value - it should not be so abundant that it loses its purchasing power.
Financial institutions play a critical role in affecting households and businesses; they serve as intermediaries between savers and borrowers, enabling the flow of money and credit in the economy. By providing a variety of accounts, such as checking and savings accounts, banks facilitate transactions and help in capital formation. The amount of savings available boosts the capital formation process, while the role of interest and risk influences the allocation of these savings to their most productive uses.