the stock exchange is an example of the?

1. Analyze the question The question asks which type of market the stock exchange belongs to. You need to know what is traded there.

2. Explain the concept Financial markets are divided by the maturity of what is traded:

• Money market: short-term funds (less than one year), such as treasury bills, commercial papers and certificates of deposit.
• Capital market: medium- and long-term funds (more than one year), such as shares (equities), debentures and government bonds.
• Commodity market: physical goods such as cocoa, crude oil and grains.
• Labour market: where workers sell their services and employers hire them.

3. Solution

• The stock exchange, such as the Nigerian Exchange Group (NGX) in Lagos, trades shares, stocks and bonds.
• These are long-term securities, and companies and governments use them to raise long-term capital.
• Labour is not traded there, so A is out.
• Short-term instruments are not its main business, so B is out.
• Physical goods are not traded there, so C is out.
• That leaves the capital market.

4. Answer The stock exchange is an example of the capital market, which is option D.

5. Exam tip Remember: "Stock = Long-term = Capital." Money market means money for a short time (under one year), and capital market means capital for a long time (over one year). If you see shares, stocks, debentures or bonds, think capital market.