Economy to function properly is efficiency in the markets

Assignment Help Financial Management

Reference no: EM131347594

We learn in finance that what allows our economy to function properly is "efficiency" in the markets. The use of financial intermediaries allows capital to flow from savers to borrowers. The savers receive interest on their investments and the borrowers pay interest to receive capital.

For your discussion forum this week I would like for you to think about what financial transactions might be like if there were no markets. An early pioneer in studying market activity, Coase (1932), challenges us to consider that if markets were perfect why would we need firms or financial intermediaries?

In your post, discuss what would happen if you wanted to purchase equipment for your company and there was not a bank to borrow the capital from . . . what would you do? What costs would arise? As you develop your answer I believe you will quickly realize the importance of the concept of "efficiency" in the marketplace.

Your reply should be at least 1-2 paragraphs.

Reference no: EM131347594

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