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Financial Markets Overview

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Questions and Answers

What is the primary function of financial markets?

To ensure economic activity by facilitating access to funds (correct)

To provide liquidity to investors

To guarantee fixed interest rates for borrowers

To control government spending

Who are the users of funds in the financial markets?

Only businesses

Businesses, governments, and households (correct)

Only households

Only financial institutions

What role do intermediaries like banks and mutual funds play in financial markets?

They regulate government spending

They channelize surplus funds from lenders to users (correct)

They consume surplus funds

They provide funds to users directly

What is one of the requirements for an efficient financial market?

Allowing participants to review their funding decisions based on new information Signup and view all the answers

Why is aggregation of funds from a large number of investors important in financial markets?

To make funds available for productive economic activity Signup and view all the answers

What is the significance of providing liquidity and exit options in financial markets?

To ensure participants can easily sell assets and exit investments if needed Signup and view all the answers

What is the main focus of financial market regulations and regulators?

Setting up systems and processes to streamline fund transfer activities Signup and view all the answers

Which of the following is NOT included in the definition of 'Securities' as per the SCRA, 1956?

Mortgage loans Signup and view all the answers

What is the role of securities markets in transferring resources?

Enhancing savings and investment by connecting savers with investors Signup and view all the answers

Which of the following is NOT considered a type of 'Securities' under the SCRA, 1956?

Commodities futures Signup and view all the answers

What does decoupling savings from investments mean in the context of securities markets?

Allowing savers and investors to be limited by the economy's abilities instead of individual capacities Signup and view all the answers

What do securities markets provide channels for?

Allocation of savings to investments Signup and view all the answers