Question

............. creates liquidity.

• A. Organised market
• B. Unorganised market
• C. Primary market
• D. Secondary market

Hint:

Liquidity is most effectively created in organised markets due to the proper regulations and more participants.

Answer 1

The Correct Option is A

Step 1: Understanding liquidity.
Liquidity refers to the ease with which an asset can be bought or sold in the market without affecting its price. An organised market, where transactions are regulated and follow a structured process, facilitates liquidity by ensuring there are enough buyers and sellers.
Step 2: Analyzing the options.
(A) Organised market: This market creates liquidity because it follows structured regulations and transactions.
(B) Unorganised market: Unorganised markets may have lower liquidity due to less regulation and fewer participants.
(C) Primary market: The primary market deals with the issue of new securities and is not directly related to creating liquidity.
(D) Secondary market: While secondary markets deal with the buying and selling of existing securities, organised markets specifically create liquidity through proper regulation and participants.
Step 3: Conclusion.
The correct answer is (A) Organised market, as it provides structure and regulation, facilitating liquidity.