Question

Problem 2 – Short Answer

a.) Why are financial markets important to the health of the economy?

b.) True or false? Explain. “Because corporations do not actually raise any funds in secondary markets, secondary markets are less important to the economy than primary markets are.”

Answer 1

Answer:-

(A) Financial markets improve efficiency and allocating resources. they get funds from them who don't use it in productive ways and give them who use it for productive ways. so it's results in higher economic efficiency.

(B) This statement is False.

Prices in secondary markets determine the prices that firms issuing securities receive in primary markets. here, also secondary markets make securities more liquid and easy to sell in the primary markets.so secondary market are more important than primary Market.