Financial markets promote economic efficiency by * A.channeling funds from investors to savers. B. creating inflation. C.causing recessions. D. channeling funds from savers to investors.
Financial markets promote economic efficiency by *
A.channeling funds from investors to savers.
B. creating inflation.
C.causing recessions.
D. channeling funds from savers to investors.
Answer -
The financial system performs the essential economic function of channeling the funds of savers deposit money in the bank from those who are net savers (i.e. who spend less than their income) to those whom bank lends the deposited money to investors are net spenders (i.e. who wish to spend or invest more than their income).
In other words, the financial system allows net savers to lend funds to net spenders.
The financial system achieves this transfer by creating financial instruments, which are assets for savers and
liabilities for borrowers.
In financial markets, savers provide funds directly to investors by buying their stocks and bonds..
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