Question

Financial markets are important for bringing equilibrium to the loanable funds market, but do not affect the efficient allocation of scarce resources in the long-run.
a. True
b. False

Answer 1

The statement," Financial markets are important for bringing equilibrium to the loanable funds market, but do not affect the efficient allocation of scarce resources in the long-run." is false.

Explanation:

Financial markets are important for bringing equilibrium to lonable funds and  in the long run they affect the allocation efficiency of scare resources. They probably shift the scare resouces of the economy from savers to borrowers.

Financial market is an arena where trading of financial derivatives and securities occurs at lower transaction costs. The securities are namely bonds, stocks, etc.,

The role of financial markets are as follows,

• allocation of resources

• operation of modern economies

• provides the government/business entities access to capital

• provides employment