Financial intermediaries are[Fill in the blank]

Question

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Question: Financial intermediaries are[Fill in the blank]

Options:
 a. the same as financial markets.
 b. individuals who make profits by buying a stock low and selling it high.
 c. a more general name for financial assets such as stocks, bonds, and checking accounts.
 d. financial institutions through which savers can indirectly provide funds to borrowers.

Analysis:
- Option a: 'the same as financial markets.' This is inaccurate because financial intermediaries and financial markets are distinct concepts. Financial markets are platforms where securities are traded among buyers and sellers, whereas intermediaries are institutions that facilitate the flow of funds between savers and borrowers. Intermediaries include banks, credit unions, and mutual funds, which perform intermediation services rather than simply being markets. So this statement confuses the two terms.
- Option b: 'individuals who make profits by buying a stock low and selling it high.' This describes traders or investors, not financial intermediaries. While individuals can act as intermediaries only in a loose sense, the definition here misidentifies the role. Intermediaries are typically institutions that pool and channel funds, not individual profit-seekers specifically.
- Option c: 'a more general name for financial assets such as stocks, bonds, and checking accounts.' This describes financial assets themselves or types of assets, not the institutions or entities that connect savers with borrowers. Intermediaries are the middlemen, not the assets.
- Option d: 'financial institutions through which savers can indirectly provide funds to borrowers.' This precisely captures the function of financial intermediaries: they collect funds from savers and channel them to borrowers, often transforming short-term deposits into longer-term loans and providing maturity, liquidity, and risk management benefits. This aligns with standard definitions of intermediaries like banks, mutual funds, and other financial institutions.

Summary of reasoning:
- A wrongly equates intermediaries with markets.
- B misidentifies intermediaries as individual traders.
- C confuses intermediaries with the financial assets themselves.
- D correctly defines financial intermediaries as institutions enabling savers to indirectly fund borrowers, capturing the essence of intermediation in financial systems.

Financial intermediaries are[Fill in the blank]

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Financial intermediaries are[Fill in the blank]

View Explanation

Log in for full answers

Similar Questions

Part 1Which of the following is not an important financial intermediary in the​ economy? A. Commercial banks. B. Mutual funds. C. The Fed. D. Finance companies.

Part 1 Financial intermediaries LOADING... have a role to play in matching savers and borrowers for all of the following reasons except​:Part 2 A. economies of scale B. risk sharing C. information symmetries D. minimising transaction costs

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Which of the following statements is FALSE?

Which of the following is NOT a major function of financial intermediaries?

Which function of a financial intermediary reduces transaction and information costs between a corporation and individual which may encourage a higher rate of savings?

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More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

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