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IAI Actuarial Core Principles · Business Economics · Role, structure and stability of the financial system

Which of the following is an example of the financial system providing a payments and settlement function for the economy?

Customers paying suppliers through UPI and bank transfers is the payments and settlement function, because it moves money to settle trade. Issuing shares and auctioning treasury bills raise finance, insurance pools risk, and buying an ETF is an investment, so none of these is the payments function.

  1. AA company issuing new equity shares to the public
  2. BAn insurer pooling premiums to pay future claims
  3. CA government auctioning treasury bills
  4. DCustomers transferring money to suppliers through UPI and bank transfersCorrect
  5. An investor buying a gold exchange-traded fund

Explanation

Payments and settlement means providing mechanisms to transfer value for goods and services, as UPI and bank transfers do. Share issues and treasury auctions raise funds, insurance pools risk, and an ETF purchase is an investment.

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