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SS2: ECONOMICS - 3RD TERM

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  1. Public Finance I | Week 1
    5 Topics
  2. Public Finance II | Week 2
    7 Topics
    |
    1 Quiz
  3. Balanced and Unbalanced Budgets| Week 3
    5 Topics
    |
    1 Quiz
  4. Elements of National Income Accounting | Week 4
    5 Topics
  5. Elements of National Income Accounting II | Week 5
    6 Topics
  6. Income Determination | Week 6
    4 Topics
    |
    1 Quiz
  7. Financial Market | Week 7
    1 Topic
  8. Demand for and Supply of Money | Week 8
    8 Topics
    |
    1 Quiz
  9. Inflation | Week 9
    7 Topics
  10. Deflation | Week 10
    5 Topics
    |
    1 Quiz



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What is Financial Market?

A financial market is a market where money and near-money instruments exchange hands between lenders and borrowers. It provides the opportunity for financial institutions to make facilities for borrowers and lenders.  

Types of Financial Market

Financial Markets are divided into two categories

  1. Money Market 
  2. Capital Market

Money Market:

The money market is the market for short-term loans. The loans granted can be demanded at short notice. The money market is composed of the commercial bank, the Central Bank, discount house, bill brokers, acceptance house or merchant banks, and the foreign exchange market. It is controlled by the Central Bank.

The Institution involved in the money market includes

  • Central Bank
  • Commercial bank
  • Discount house
  • Acceptance house
  • Finance House

The instrument used in the money market includes Bills of exchange, Treasury Bills, Call Money Funds.

Advantages of Money Market

  1. Money market enables investors to meet up with their short term financial need by borrowing from the market.
  2. Funds invested in the money market can be recalled at short notice for other purposes
  3. The market promotes economic growth and development
  4. The opportunity of keeping funds is extra income in form of interest
  5. The market promotes economic growth and development.

Capital Market:

The capital market is the market for medium and long-term loans. The capital markets serve the needs of industrial and commercial sectors. It also serves as a medium through which government and local authorities borrow funds.

The capital market is composed of the following institutions: Issuing houses, insurance companies, building societies, investment and unit trusts, pensions funds development bank and the stock exchange.

The instruments used in Capital Market: The stocks and shares

SFEM (Second Tier Foreign Exchange Market) is a market established by law for buying and selling of foreign exchange at market determined prices. It was established on 29th September 1996 for buying and selling of foreign exchange through license e.g. Bureau exchange.

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