Describe The Role Of Financial Institutions And Financial Markets In The Economy

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Financial Market and Institutions
Describe The Role of the Financial Institutions and Financial Markets in the Economy
The term financial market is a general terminology that makes reference to an establishment where various buyers and sellers meet and get involved in trading assets that are inclusive of equities, derivatives, bonds, currencies and so forth. The distinctive feature of the money markets is the existence of transparent pricing, being bound by basic regulations that exists in the industry, the accompanying costs, and fees. It is important to note that the prices of the financial instruments being traded are determined the forces of demand and supply. Money related markets assume a critical part in contributing to the wellbeing and proficiency of an economy. There is a solid positive relationship between budgetary business sector advancement and financial development (Federal Reserve
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Generally, capital markets refer to the type of financial markets where the stocks and bonds are traded. Notably, large companies and governments source for long term funding from the capital markets. On the other hand, the money markets refer to the financial markets where short term more liquid financing is available. Generally, money markets refer to cash markets while capital markets sell long term debts or equity securities (Omar, Abduh & Sukmana, 2013). Money markets mostly consist of banks which lend and borrow from and lend to each other. However, other types financial institutions may also take part in the money markets. The common instruments used in the money markets include commercial paper, certificate of deposits, repurchase agreements, bankers’ acceptance, and so forth. On the other hand, stocks and bonds are the major instruments used in borrowing and

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