a) Using a clearly-labelled diagram, demonstrate and subsequently explain the flow of funds

through direct and indirect channels in the economy. (6 marks)

b) Capital Markets are not necessary efficient. This therefore gives rise to information asymmetry

which results to undesirable effects in the operations of the market. Information asymmetry

interferes with the operations of the markets and achievement of its role of financial mobilization

and intermediation in the various sectors of the economy. Explain the term 'Adverse selection'

and moral hazards' in relation to information Asymmetry