Complexities of the U.S. Financial System

Complexities of the U.S. Financial System

Impact of US Financial Market on Economy and Business

It is understood that financial markets play a vital role in contributing to the effectiveness and efficiency of the economy. There is a positive relationship between the mentioned factors. Financial markets are means of provision of funds, savings and raise investment in the economy. It allows US economy to gather sufficient capital and helps in production of enormous goods and services. A developed financial market caters the needs and requirements by offering diversified range of financial products and services to creditors and borrowers to boost the flow of funds into the economy and helps business grow and expand their operations via offering wide range of credit worthy financial products. Therefore, one can imagine the height of significance of a developed financial market on the overall economy.

Financial markets are the key representatives of the overall game plan. These involve key players that are engaged in trading bonds or sell and buy stock, sell and buy financial instruments via banks and financial institutions like that of Certificate of deposits, derivatives etc. Similarly, financial institutions like that od pension funds, insurance companies, mutual funds offer products and services to investors and individuals to make most of diversified range of products and mitigate risks. He financial markets like that of US offer greater extent of liquidity to businesses and individual investors. The US financial market is considered as the most developed and organized market in the world (Federal Reserve Bank of San Francisco, 2005).

The stock market has significant impact on all kinds of investors and businesses that ultimately affect economy. The declining stock prices results into losses and significantly declines the level of spending by investors in the market. In addition, this wealth effect also ...