When financial markets and institutions are NOT efficient in matching savers and borrowers
A) interest rates fall, which discourages saving even further.
B) interest rates fall, which discourages investment even further.
C) resources are lost.
D) investment rises.

Question

Quizplus · Accepted Answer

When financial markets and institutions are not efficient in matching savers and borrowers, resources are lost. This is because potential borrowers may not be able to access the funds they need to invest or grow their business, while savers may not earn a return on their savings. As a result, both borrowers and savers can suffer losses, causing a misallocation of resources within the economy. This can lead to reduced economic growth and productivity.

When Financial Markets and Institutions Are NOT Efficient in Matching