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Study Questions Chapter 14 - Study Questions-1 What are...

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Study Questions Chapter 14 14-1. What are financial markets? What function do they perform? How would an economy be worse off without them? Financial markets are institutions and procedures that facilitate transactions in all types of financial claims. Financial markets help to allocate finances between supply and demand of currency with in a market. Without financial markets economies would suffer, since financial markets provide the buying power for corporations, individuals, and governments. 14-2. Define in a technical sense what we mean by financial intermediary. Give an example of your definition. A financial intermediary is a person, company, or organization that collects the savings of individuals and issues its own securities in exchange for these savings. The financial intermediary then uses the funds to directly acquire securities. Acts kind of like the middle-man in the sales of securities. Like a car dealer sells the car from the factory to the customer, instead of the customer buying directly from the factory. An investment banker is considered a financial
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