Question

The financial system is financial markets and financial intermediaries through which firms acquire funds from households. Which of the following are advantages the financial system offers for households?

Question 1 options:

	Consumption goods.
	Household services.
	The elimination of risk.
	Liquidity.
	Information.
	Risk-sharing.

Answer 1

Option D, E, F.

• The financial system is a network of financial institutions that work together to enable the exchange of funds between households, lenders and borrower's.
• The various advantages offered by the financial systems to households are :

1. Liquidity :- they provide liquidity so that the funds can be readily converted to cash.
2. Information :- they Provide accurate and precise information timely about the transactions.
3. Risk-sharing :- It allows the equal distribution of risks caused due to the uncertainty of an assets returns among all.