Financial markets allocate capital based on:

Question

Quizplus · Accepted Answer

Financial markets allocate capital based on the pricing mechanism, which is the process of determining the value of an asset through supply and demand forces. Prices in financial markets reflect market expectations about the future cash flows of the underlying assets, and these prices provide important signals for investors and firms to make investment decisions. Financial intermediaries and central banks may play a role in facilitating market transactions and providing liquidity, but ultimately the allocation of capital is determined by the pricing mechanism. The number of treasury bills outstanding is not directly relevant to the process of capital allocation.

Financial Markets Allocate Capital Based On