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Impact of Financial Markets on Economic Stability and Growth: The Case of Sub-Prime Mortgage Lending - page 19 / 42

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1/23/2015

Jamshid Damooei, PhD

19

Financial Markets and Economic Stability & Growth…..Continued

Most economies around the world rely principally upon markets to carry out the complex task of allocating scarce resources

Markets also distribute income by rewarding superior producers with increased profits, higher wages, and other economic benefits.

There are essentially three types of markets within the global economic system.

The factor markets allocate factors of production (land, labor, skills, capital) and distribute  income (wages, rent) to the owners of productive resources.

Consuming units use most of their income from factor markets to purchase goods and services in the product markets.

The financial markets channel savings to those individuals and institutions needing more funds for spending than are provided by their current incomes.

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