Chapter 14 Study Questions Essay Example | Topics and Well Written Essays - 750 words

Chapter 14 Study Questions - Essay Example Financial markets could make the economy worse if they cease to exist and similarly could up the economic basis of any nation with their presence. A financial market takes care of both the market economy as well as the non-market economy at a single time. (Lyons, 2001) A financial intermediary, technically speaking, is an institution that provides indirect fund means from the people who want to save or lend towards the people who wish to invest or borrow at the same time. The institution acts as the middleman between the firms that raise funds and the investors in essence. The financial intermediary is basically a financial institution in the most basic sense. As an example, this institution could either be a bank or a credit union. At times, the financial intermediary is seen in the instance of an insurance company as well. The financial intermediary could also be an individual who has the basic role of intermediation under a financial context between two or more parties. The funds are channeled in an easy way through the financial intermediary and the lenders and borrowers have a direct basis with the financial intermediary while indirectly they deal with each other. Money markets are those markets which act as substitutes for money. Capital markets are the markets for the long run basis of securities where they take care of both debt and equity. Money markets look at overnight to short term funds while capital markets mobilize long term savings so that financing of long term investments could be made. Money markets have maturity of one year or less than a year while capital markets have long term measures within them. Money markets collect different markets under them for a number of different instruments while capital markets look to include both the lending and borrowing regimes. Within money markets, the credit worthiness of the participants is deemed as significant while