Final answer:
Financial markets improve economic welfare by allowing consumers better timing for purchases, reallocating funds from savers to investors, and indicating the performance of firms in their prices, thus weeding out inefficient ones.
Step-by-step explanation:
Financial markets perform a crucial role in enhancing economic welfare primarily by reallocating funds from savers to investors, thus facilitating better timing for consumption and investing in business growth opportunities. However, among the options provided, the most accurate is B) they allow consumers to time their purchase better. This function allows individuals and businesses to plan and adjust their consumption based on their financial goals and lifecycles. Markets also offer insight into firm performance, indicating that C) they weed out inefficient firms over time by reflecting those firms' performances in their stock and bond prices. Regarding D) eliminate the need for indirect finance, this is not accurate as financial markets are the very mechanism of indirect finance, wherein banks and other financial institutions act as intermediaries between savers and borrowers.