Question

Discuss the functions and significance of stock exchanges in the modern
economy. How do stock exchanges facilitate capital formation?

06 Aug 2026
Answer :
Word Count : 527
Stock exchanges are organized and regulated markets where securities such as shares, debentures, bonds and other financial instruments are bought and sold. They play an important role in the functioning of a modern economy by connecting companies that require capital with investors who have surplus funds. Stock exchanges provide an efficient mechanism for mobilizing savings, facilitating investment, ensuring liquidity and promoting economic development. One of the major functions of a stock exchange is to provide a continuous and organized market for securities. Investors can buy and sell securities through recognized mechanisms, making transactions more convenient and transparent. Stock exchanges also provide liquidity to investments. An investor who purchases shares does not
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