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.

Question

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.

BlackTom AI · Accepted Answer

To analyze the question, I will assess each option in turn and explain why it does or does not fit the role of a financial intermediary.
Option A: Commercial banks. These institutions collect deposits and use those funds to provide loans or other financial services, effectively channeling funds from savers to borrowers. This is a classic example of a financial intermediary, so this option describes an important intermediary. 
Option B: Mutual funds. Mutual funds pool money from many investors to purchase a diversified portfolio of securities, providing liquidity and investment access to individual savers. This is another textbook financial intermediary, so this option also describes an important intermediary. 
Option C: The Fed. The Federal Reserve is the central bank of the United States. Its primary functions include conducting monetary policy, regulating banks, and providing financial services to the U.S. government and depository institutions. While it plays a crucial role in the stability and functioning of the financial system, it is not a financial intermediary that channels funds directly from savers to borrowers. Instead, it interacts with the banking system and influences the cost and availability of money, rather than serving as a middleman in financing activities.
Option D: Finance companies. Finance companies borrow from lenders and then lend to consumers or small businesses, often focusing on personal loans, auto financing, or small business credit. They perform the essential intermediary function of transforming funds into credit for end users, making them an important intermediary.
In summary, options A, B, and D describe entities that actively channel funds between savers and borrowers, fulfilling typical intermediary roles. Option C, the Fed, does not function as a direct financial intermediary in the sense of pooling and re-lending funds to end borrowers, even though it influences monetary conditions and liquidity in the economy. Therefore, Option C is not an important financial intermediary in the economy.

Homework:Chapter 1 Homework

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.

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Homework:Chapter 1 Homework

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.

View Explanation

Log in for full answers

Similar Questions

Financial intermediaries are[Fill in the blank]

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 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?

Which of the following is NOT a reason for the specialness of financial intermediaries?

Banks a. play no role in the financial system. b. are financial intermediaries c. are financial markets, as are bond markets. d. All of the above are correct.

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

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

Part 1Which of the following is not an important financial intermediary in the economy? A. Mutual funds. B. Commercial banks. C. The central bank. D. Pension funds.