The primary purpose of the financial system is to
A)make it possible for checks written on a bank in one part of the country to clear against an account in a bank in another part of the country.
B)allow the government to raise enough money to cover its budget deficit.
C)move funds from those who want to spend less than they have available to those with productive investment opportunities.
D)facilitate the efficient exchange of goods and services.

Question

Quizplus · Accepted Answer

The primary purpose of the financial system is to move funds from those who want to spend less than they have available to those with productive investment opportunities. This is achieved through mechanisms such as savings accounts, loans, and investments in stocks and bonds. While the financial system may also facilitate the exchange of goods and services (D), its primary purpose is to allocate capital efficiently. The financial system may also be used by the government to raise money through bond issuance, but this is a secondary function (B). The ability of checks to clear between banks is a function of the payment system, which is closely related but distinct from the financial system as a whole (A).

The Primary Purpose of the Financial System Is to