Which of the following is an objective of the Capital Market? A. Ensuring stability in the financial system B. Promoting international trade C. Providing short-term financing to businesses D. Mobilizing long-term savings for investment
Question
Which of the following is an objective of the Capital Market? A. Ensuring stability in the financial system B. Promoting international trade C. Providing short-term financing to businesses D. Mobilizing long-term savings for investment
Solution
The objective of the Capital Market is D. Mobilizing long-term savings for investment.
Here's why:
A. Ensuring stability in the financial system - This is more of a role for central banks and regulatory bodies, not the capital market.
B. Promoting international trade - This is not a direct objective of the capital market. While it can indirectly influence international trade (through the availability of capital for businesses), it's not its primary objective.
C. Providing short-term financing to businesses - This is typically the role of the money market, not the capital market. The capital market is more focused on long-term financing.
D. Mobilizing long-term savings for investment - This is indeed a primary objective of the capital market. It allows companies to raise funds for long-term projects by issuing securities like stocks and bonds, which investors can buy. This mobilizes the savings of individuals and institutions for investment into these businesses.
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