ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Financial markets play an important role in the allocation of scarce resources in an economy by performing the following four important functions. 1. Mobilisation of Savings and Channeling them into the most Productive Uses: A financial market facilitates the transfer of savings from savers to investors.

Detailed explanation-2: -Facilitate price discovery, provide liquidity to financing assets and reduce the cost of transaction are all functions of financial markets.

Detailed explanation-3: -Capital market by increasing the mobilization of savings and increasing the capital formation influence the economic growth and increasing gross domestic product (GDP).

Detailed explanation-4: -Savings mobilization refers to creating safe and sound institutions where savers can place their deposits with the expectation that they will receive the full value of their funds, plus a real return, upon withdraw-al.

Detailed explanation-5: -Financial Markets perform various functions in any country, allowing companies and traders to buy and sell the different financial instruments and financial securities. It acts as an intermediary between savers and the investors by mobilizing the funds between them and helps determine the prices of securities.