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

Question

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

BlackTom AI · Accepted Answer

The prompt asks why financial intermediaries have a role in matching savers and borrowers for all of the following reasons except. We'll evaluate each option in turn to determine which one does not fit as a reason for the role of financial intermediaries.
Option A: economies of scale. Financial intermediaries typically pool funds from many savers and lend to many borrowers, achieving cost advantages and efficiency through economies of scale. This reduces per-unit transaction costs and can justify their existence, so this is a valid reason for their role.
Option B: risk sharing. Intermediaries diversify risk by holding diversified portfolios of assets and by providing instruments like insurance and securitized products. Through diversification, they can reduce the risk faced by individual savers and borrowers, making this a legitimate rationale for their function.
Option C: information symmetries. This phrase refers to situations where information is equally available to all parties. In fact, financial intermediaries often reduce information asymmetries (not symmetries) by performing screening and monitoring, which helps bridge the information gap between savers and borrowers. Therefore, information symmetries is not the correct justification; the more accurate issue is information asymmetries that intermediaries help mitigate.
Option D: minimising transaction costs. Intermediaries lower transaction costs by standardizing contracts, providing liquidity, and reducing search and information costs, which is a core reason for their role in matching savers and borrowers.
In summary, A, B, and D identify genuine benefits provided by financial intermediaries (cost efficiency, risk management through diversification, and lower transaction costs). Option C describes information symmetries, whereas the actual economic rationale involves information asymmetries that intermediaries help to alleviate, making C the exception.

Homework:Chapter 2 Homework

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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