Which of the following is a feature of the 'Financial Development' and growth literature?
A. Better-functioning financial systems can promote growth by improving the allocation of capital and reducing financing constraints
B. Financial development always retards growth
C. Only the size of the banking system matters and quality is irrelevant
D. Finance is completely neutral for real activity
Answer: Option A
Solution (By JKSSB Mock Tests)
A large body of research finds that financial development—deeper, more efficient and more inclusive financial systems—tends to raise long-run growth by relaxing credit constraints and improving resource allocation.
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