Question

Financial market allocates or directs funds available for investment into the most productive investment opportunity. In doing so, it performs the __________ function.

• A. Creative
• B. Exchange
• C. Allocative
• D. Productive

Hint:

Allocative function of financial markets ensures that scarce resources flow to the best investment opportunities.

Answer 1

The Correct Option is C

The allocative function of the financial market involves channeling funds from savers to the most efficient and profitable investment opportunities. It ensures that resources are used where they can generate the highest return, promoting overall economic growth. This function is vital in prioritizing sectors that need funding and helps in the optimal use of scarce capital resources.
textbf{Final Answer:} (C) Allocative