What does the term 'Financial Markets' most accurately describe in the context of global economics?
A. The total production within a country's borders
B. Payments not made in exchange for goods or services
C. A sudden fall in a nation's currency value
D. A country's total trade balance
Answer (1)
The correct answer is letter A. The total production within a country's bordersFinancial markets are places or systems where people and institutions buy and sell financial assets such as stocks, bonds, foreign currencies, and derivatives. These markets connect those who want to save or invest their money with those who need funds for business or government spending.Types of Financial MarketsStock Market – where companies sell shares to raise capital (e.g., Philippine Stock Exchange).Bond Market – where governments and companies borrow money and agree to pay it back with interest.Foreign Exchange Market – where currencies are traded (e.g., USD to PHP).Derivatives Market – where financial contracts based on future prices are bought and sold.Benefits of Having Financial MarketsRaising Capital – Small or big businesses can grow using funds from investors.Spreading Risk – Investors can diversify their money by buying many types of investments.Liquidity – People can quickly buy or sell assets.Price Discovery – They help determine the fair value of financial instruments.In the Philippines, the existence of an organized stock exchange and bond market supports entrepreneurship and infrastructure development. Students need to understand that the financial market is not just about Wall Street—it directly affects jobs, growth, and personal finance too.
