What are Financial Markets?
- Financial markets are the institutions through which individuals with savings can supply these funds to persons or firms that wish to borrow money to purchase consumption goods or invest in physical goods.
How Do I Remember It?
- Think of financial markets as the “exchange centers” where people trade money for financial assets like stocks or bonds. It’s like a marketplace where buyers and sellers come together to exchange financial instruments.
Real World Example
- Stock exchanges like the New York Stock Exchange (NYSE) or the NASDAQ allow investors to buy and sell shares of publicly traded companies.
- Bond markets enable governments and corporations to raise funds by issuing bonds to investors.
- Currency markets, such as the foreign exchange (forex) market, facilitate the trading of currencies between individuals, businesses, and governments.
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