It Is Important to Be Able to Resell Financial Claims

question 36

Multiple Choice

It is important to be able to resell financial claims in a secondary market because it allows:

• A)DSUs to finance a project with successive issues of financial claims.
• B)DSUs to implement projects with horizon shorter than the SSUs' investment horizon.
• C)SSUs to purchase financial claims with maturities that are longer than their investment horizon.
• D)SSUs to purchase financial claims with maturities that are shorter than their investment horizon.

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Definitions:

Ideal Economic Efficiency

A state where resources are allocated in the most efficient way possible, maximizing total net benefit to society or economy.

Government Failure

Situations where government interventions in the economy lead to inefficient outcomes, worsening the problem they intended to solve.

Efficient Allocation

The optimal distribution of resources among competing uses, aiming to maximize the overall benefit or utility from those resources.

Government Failure

A situation where government intervention in the economy causes inefficiencies or leads to an allocation of resources worse than the free market.