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4.4.1 Roles of Financial Markets (Edexcel A-Level Economics Teaching PowerPoint)


Last updated 1 Nov 2023

This Edexcel teaching powerpoint covers many aspects of the Roles of Financial Markets.

Financial markets play a crucial role in modern economies, and here are a few key ones:

  • Allocating resources: Financial markets allow individuals and businesses to allocate capital to their most productive uses. Investors provide capital to companies that need it to grow and create value, while borrowers are able to access funds for projects that can improve productivity and efficiency.
  • Price discovery: Financial markets allow prices to be discovered through the interaction of buyers and sellers. This price discovery mechanism is essential for efficient allocation of resources, as it reflects the value that market participants place on assets and allows prices to adjust to changing economic conditions.
  • Risk management: Financial markets allow investors to manage risk through a variety of instruments, such as options, futures, and swaps. These instruments allow investors to hedge against potential losses and protect their portfolios.

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