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प्रश्न
The financial market plays an important role in the allocation of scarce resources in an economy by performing many important functions.’ Explain any three such functions
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उत्तर
A financial market is a market for the creation and exchange of financial assets (such as shares and debentures).
Major functions of a financial market:
i. Mobilising savings: The financial market acts as a channel for mobilising savings to productive use. This is done by providing savers a platform for transferring investment. It provides savers a wide choice of investment. In this way, it ensures that the funds are directed towards the most productive investment.
ii. Establishing price: The financial market facilitates the interaction between those who demand securities (households) and the suppliers of securities (business firms). This helps in establishing a competing price for the securities.
iii. Providing liquidity to assets: By easing the process of sale and purchase of securities, the financial market provides liquidity to securities. That is through the financial market, securities can be easily converted to cash.
