Financial intermediaries, through their ability to lower transaction costs:

Question

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Financial intermediaries facilitate transactions by gathering funds from individuals and investing them on their behalf. By doing so, they enable a larger volume of trading in the economy. This is because not everyone has the resources or expertise to directly participate in financial markets, but financial intermediaries can aggregate small investments and invest in diverse portfolios, spreading risk and generating higher returns. As a result, financial intermediaries increase liquidity in the market and lower transaction costs for individuals, allowing for greater participation and increased economic activity.

Financial Intermediaries, Through Their Ability to Lower Transaction Costs