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Question
State, with reasons, whether the following statements are True or False
The financial market contributes towards the nation's economic growth and development.
Solution
The financial market contributes towards the nation's economic growth and development. This statement is True.
Reasons :
- The place where people and institutions borrow money are brought together with those having surplus funds, which is called a Financial Market.
- The financial market contributes to national growth by facilitating the continuous flow of surplus fund to business enterprises (sick and deficit units) through its allocative function ensuring a higher rate of return to the savers/household by investing the scarce resources in the enterprises having higher productivity, increasing the rate of capital formation.
- The financial market contributes a lot to the development of the entrepreneurial class by financing their business requirements. It obtains funds from individual households private and public sector units, Central govt. etc. and supply these funds to those business units who need it for productive purposes.
- The components of the Financial Market is the money market and capital market. It helps in accelerating the rate of industrial and economic development of the country. As a result, the standard of living and social welfare goes up. Thus, the Financial market contributes towards the growth and development of the nation.
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