The role of financial markets in the wider economy
Financial markets connect people who have money to spare with people who need to borrow or invest it. This process funds businesses, supports economic growth, and helps set prices across the whole economy.
Real World
When the London Stock Exchange allows investors to buy shares in companies like Rolls-Royce, it channels household savings directly into aerospace R&D and manufacturing, funding jobs and innovation across the UK economy.
Exam Focus
For 'assess' or 'evaluate' questions, always consider both allocative efficiency and systemic risk roles of financial markets.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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