6. Money Creation (What is the value it creates?) Money is used to either be reinvested or earned out
from the system flows
7. Price discovery (How much is created?) The process of determining or valuing the financial
instrument in the market.
Financial Markets - Help in creating a more efficient allocation of capital which results in higher
production and efficient that ultimately leads to economic growth.
Main economic function: Serve as a channel transfer excess funds from fund providers to fund
demanders.
Participants: household, government and businesses, financial intermediaries, brokers and dealers,
regulators, fund managers and financial exchanges.
“Trading” - Exchanging of Financial Instruments