QUESTION 1 Financial market is a place/mechanism where funds/savings are transferred from surplus units to deficit units. Whereas, financial institutions are intermediaries who act as mobilizers and depositories of savings and as providers of credit / finance.
Financial markets and institutions form a vital component of the financial system and play a major role in the economy by influencing activities within it. Thus, omission of financial institutions and markets will negatively influence the economic activity as follows;

Low capital formation. Financial institutions accept deposits from individuals which are then made available to other fund users and businesses for productive use in the economy. Therefore, capital formation within the economy will be limited in the absents of financial institution.
Limited investment. Financial institutions and markets provide the necessary loans to investors For the establishment of new or expansion of existing enterprises.However,lack of financial institutions and markets will limit establishment of new business ventures within the economy. Adverse Government deficit. The central government will be unable to meet their targeted budget. This will limit the overall economic development since proposed economic projects will stall due to insufficient funds which could have been made available by financial institutions and markets.
Unbalanced development of different regions. There will be limited transfer of funds which could have been made available by financial institutions and markets. The surplus funds will remain idle in already developed regions and hence limiting the growth of underdeveloped regions.
Increased risk levels. Financial institutions and market minimizes the impact of financial loss caused by unforeseen events such as accidents, asset loss due to flood or earthquakes and other perils. Absents of