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Bonds, stocks, and other financial claims which are sold in the money and capital markets provide an outlet which can be used by companies or businesses who obtain loans in order the increase the production of goods and services. Productivity will rise. This in turn will create an increase in the overall growth of the economy.
Wealth Function
Wealth is defined as the accumulated savings built up over time. In mathematics, wealth is defined as the sum of the values of all individual assets which are held at any particular moment in time. Various individuals and businesses might store their wealth in tangible objects such as automobiles. Unfortunately, tangible objects will lose their value over time. Investments or assets have the chance of increasing in value over time.
Liquidity Function
For wealth maintained in financial instruments, the GFS can convert these instruments into cash with very limited risk. The world’s financial markets provide immediate spendable cash for savers who hold financial instruments and are in need of money. In developed countries like the United States, money comprises of mainly currency and deposits held in banks, credit unions, and other depository institutions. In lesser developed countries like Africa, simple bartering or the exchanging of one good or service for another, provides many of the same services that money provides in a developed