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Explanation:
Operational efficiency in a financial system refers to how well the system facilitates transactions and trading activities. The key aspects are:
Operational Efficiency focuses on the costs and speed of executing transactions. It measures how cheaply and quickly trades can be arranged and settled.
Option A is correct because operational efficiency specifically relates to low transaction costs, minimal delays, and smooth execution of trades.
Option B describes Informational Efficiency (or market efficiency), which is different from operational efficiency. Informational efficiency means prices reflect all available information.
Option C describes Allocational Efficiency, which refers to the optimal allocation of capital and resources in an economy to their most productive uses.
Key Distinctions:
In financial systems, operational efficiency is a prerequisite for both informational and allocational efficiency, as high transaction costs can impede price discovery and capital allocation.
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A financial system is best described as operationally efficient when:
A
the costs of arranging trades are low.
B
asset and contract prices reflect all available information.
C
an economy's resources are used where they are most valuable.