The Financial Sector

Question 1

Role of Financial Markets

Answer 1

-Facilitate saving
-Lend to businesses and individuals
-Facilitate payments
-Provide forward markets
-Provide a market for equities

Question 2

Market Failure in the Financial Sector

Answer 2

-Asymmetric information
-Externalities
-Moral hazard
-Market rigging

Question 3

Role of Central Banks

Answer 3

-Implementation of monetary policy
-Banking for the government
-Banking for other banks
-Regulation of the banking industry