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Questions and Answers
What is the primary function of the financial market?
Where do most consumers typically save their income?
What do financial institutions do with the funds supplied by households?
What does the business sector primarily use loans from financial institutions for?
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Which of the following is a major producer of public goods?
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What is the main function of the financial market?
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How do most consumers save their income?
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Which of the following is a primary concern for financial institutions regarding loans?
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What comprises the government sector?
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Which of the following is NOT a function of the financial market?
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Study Notes
Financial Market
- Financial markets exchange financial capital, examples include banks, credit institutions, saving and loans institutions, and mortgages.
- The main function is to divert household income from consumption expenditures into saving, making it available to the business sector as investment loans.
Saving
- Saving is the part of household income not used for consumption expenditure.
- Households save income in various ways, but most often by placing it in banks or other financial institutions.
Financial Institution
- Financial institutions use funds supplied by households to provide loans.
- Although they give out loans to consumers for expenditures, the primary concern is loans made available to the business sector.
- Business sector uses loans to make investment expenditures, such as purchasing capital goods, plant, and equipment.
Government Sector
- The government sector consists of local, state, and federal governments.
- It is the major producer of public goods, including highways, streetlights, schools, libraries, and national defense.
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Description
Learn about financial markets, their functions, and the concept of saving in economics. Explore how financial markets facilitate the flow of capital from households to businesses.
