The role of the financial system is to
A) channel funds from households and other savers to businesses.
B) protect commercial banks from government regulation.
C) ensure that investment banks remain profitable.
D) provide loans from the Federal Reserve to households and businesses.

Question

Quizplus · Accepted Answer

The role of the financial system is to channel funds from households and other savers to businesses in order to finance their operations and investments. This is done through financial intermediaries such as banks, which collect deposits from savers and lend to businesses and individuals in need of funds. Protecting commercial banks from government regulation, ensuring investment banks remain profitable, and providing loans from the Federal Reserve to households and businesses are all potential functions of the financial system, but they are not its primary role.

The Role of the Financial System Is to