Chapter EMA, Problem 1DS

To determine

To state: the importance of an efficient financial system.

Explanation of Solution

The financial system plays a very important part in the economy. It assists the financial intermediation procedure which enables the flow of funds between borrowers and savers, thus confirming that financial resources are distributed efficiently towards encouraging economic growth and development.

A smoothly operated and well-developed financial market plays an important role in the growth and efficiency/ development of a country. It aids in the efficient direct flow of investments and savings in the economy which enables the addition of capital and contribution to the production of services and goods.

Economics Concept Introduction

Efficient financial system: A stable financial system is able to efficiently assess, allocate resources, and manage financial risks, removing relative price movements of financial or real assets and maintaining employment levels near the economy's natural rate that will affect employment levels or monetary stability.