ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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price discovery
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liquidity to financial assets
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most productive investment opportunity
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none
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Detailed explanation-1: -A financial market helps to link the savers and the investors by mobilizing funds between them. In doing so it performs what is known as an allocative function. The process by which allocation of funds is done is called financial intermediation.
Detailed explanation-2: -The allocative function involves tax and expenditure relating to specic goods and services which it is thought might not be provided in appropriate quantities if markets were left to function independently. See also distribution function and stabilisation function.
Detailed explanation-3: -Financial markets exist for several reasons, but the most fundamental function is to allow for the efficient allocation of capital and assets in a financial economy.
Detailed explanation-4: -1 Answer. (a) The rate of return offered to the investors would be higher.