Final answer:
Efficient capital markets are essential for economic growth as they facilitate the optimal allocation of resources, encourage investment, promote innovation, and foster international trade that leads to overall macroeconomic expansion.
Step-by-step explanation:
Efficient capital markets are crucial for economic growth because they enable the optimal allocation of resources, attract investment, and promote innovation. Capital markets facilitate the movement of funds from savers to borrowers and businesses seeking to expand, which encourages the formation of human and physical capital. As individuals acquire more education and skills, they become more productive, leading to higher wages and spurring economic growth. Similarly, firms invest in physical capital and new technologies, improving productivity and profits. Moreover, efficient capital markets allow for international trade, providing businesses access to larger markets and cheaper resources, further fueling economic growth.