Financial markets : a. determine tax rates. b. increase transactions costs. c. reduce diversification. d. are the same as resource markets. e. provide liquidity.

The correct answer is letter "E": provide liquidity.

Explanation:

Financial market describes any manner in which buyers and sellers meet for trading assets, usually financial securities such as stocks, bonds currencies, options, and derivatives. Financial markets are a cornerstone of the capitalist economy because they assist entrepreneurs and businesses in facilitating capital formation and liquidity.

Financial markets create liquidity by making the trading of financial holdings easy for buyers and sellers without the need of a physical market.