Describe the role of the financial institutions and financial markets in our economy.

Financial institutions and financial markets are essential components of the economy, helping to mobilize capital and facilitate economic growth. Financial institutions like banks, credit unions, insurance companies, mutual funds and pension funds act as intermediaries between lenders (savers) and borrowers (investors). These financial institutions provide a variety of services for individuals, businesses, governments and other organizations. They help consumers with checking accounts, mortgages and auto loans; they finance business investment in plants, equipment and research; they invest international trade; they manage government debt obligations; and they distribute risk through insurance products.

Financial markets are where securities such as stocks, bonds or derivatives are bought or sold. Through these markets investors can buy or sell securities with relative ease while also generating returns on their investments. The primary goal of financial markets is to allocate capital efficiently across all areas of the economy by creating liquidity so that resources can flow from lower-return activities to higher-return ones. This helps keeps cost of financing low while enabling more businesses to access capital when needed.

By providing liquidity in the form of cash flows , credit lines , equity stakes , loans , bonds or derivative instruments , financial institutions play an important role in helping individuals save for retirement as well as allowing entrepreneurs to create new job opportunities for themselves . By enabling efficient money movement between savers/lenders and borrowers/investors alike at a much lower cost than ever before due to technology advancements made over time , these entities help keep our economy humming along.