What are the functions of Financial Mark | Class 12 Business Studies Chapter Financial Markets, Financial Markets NCERT Solutions

Question:

What are the functions of Financial Market?

Answer:

Financial Market plays an important role in the allocation of scarce resources in an economy by performing four important functions:

  1. Mobilization of saving and channelising them into the Most Productive Uses: A financial market facilitates the transfer of savings from savers to investors. Thus, it helps in Channelising surplus funds into the most productive uses.

  2. Facilitating price discovery: Households represent the supply of funds and the business firms represent the demand. The interaction between the demand and supply helps in the price discovery of financial asset, which is being traded in a particular market.

  3. Providing liquidity to financial assets: Financial market facilitates easy purchase and sale of financial assets. In doing so, they provide liquidity, which means that financial assets are easily converted into cash whenever required.

  4. Reducing the cost of transactions: Financial markets provide a common platform where buyers and sellers meet. It helps in saving time, effort and money of the buyers and sellers at the time of trading in the market, by providing them valuable information.


Study Tips for Answering NCERT Questions:

NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:

  • Read the question carefully and focus on the core concept being asked.
  • Reference examples and data from the chapter when answering questions about Financial Markets.
  • Review previous year question papers to get an idea of how such questions may be framed in exams.
  • Practice answering questions within the time limit to improve your speed and accuracy.
  • Discuss your answers with your teachers or peers to get feedback and improve your understanding.

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Welcome to the NCERT Solutions for Class 12 Business Studies - Chapter . This page offers a step-by-step solution to the specific question from Excercise 2 , Question 1: What are the functions of Financial Market?....