Most individuals save at banks rather than lend directly because:

Question

Quizplus · Accepted Answer

Banks can reduce the cost of information asymmetry through economies of scale, making it more efficient to save at a bank rather than lend directly. Option A is incorrect because information asymmetry is not created by the bank, but rather exists naturally between lenders and borrowers. Option B is incorrect because moral hazard exists in both scenarios. Option D is incorrect because information asymmetry affects banks as well as individuals.

Most Individuals Save at Banks Rather Than Lend Directly Because