Financial markets and intermediaries allow investors and businesses to reduce and reallocate risk.

Question

Quizplus · Accepted Answer

Financial markets and intermediaries provide various tools and mechanisms to manage and distribute risk, such as diversification, insurance, hedging, and pooling. These help investors and businesses to reduce the impact of unfavorable events, such as market fluctuations, credit default, or operational failures, and to channel their resources into more productive and efficient uses. Therefore, financial markets and intermediaries can enhance the resilience and stability of the economy by facilitating risk management and allocation.

Financial Markets and Intermediaries Allow Investors and Businesses to Reduce