ECONOMICS
MONEY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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both savers and borrowers invest in the same markets.
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savers deposit money that is then used to lend money to borrowers.
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the financial institutions offer the same rate of exchange to each.
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borrowers take money from financial institutions to invest with savers.
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Detailed explanation-1: -Banks as Financial Intermediaries Banks act as financial intermediaries because they stand between savers and borrowers. Savers place deposits with banks, and then receive interest payments and withdraw money. Borrowers receive loans from banks and repay the loans with interest.
Detailed explanation-2: -Financial markets are the institutions through which savers can directly provide funds to borrowers.
Detailed explanation-3: -A financial intermediary does this by borrowing funds from the lender-savers and then using these funds to make loans to borrower-spenders. For example, a bank might acquire funds by issuing a liability to the public (an asset for the public) in the form of savings deposits.
Detailed explanation-4: -Banks are intermediaries between depositors (who lend money to the bank) and borrowers (to whom the bank lends money). The amount banks pay for deposits and the income they receive on their loans are both called interest.