Question 1

Savers increasingly favour investments that closely imitate diversified investments in the direct securities markets over the transformed financial claims offered by traditional FIs.

Accepted Answer

Savers are seeking to invest in securities that closely mimic the direct securities markets, rather than traditional financial institution products.

Question 2

Explain the causes of the global financial crisis (GFC) and outline how and why the Australian government implemented the Financial Claims Scheme.

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Question 3

What are the entry costs for the financial intermediation sector in Australia? Would you consider entry to be easy or difficult? Explain.

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Question 4

In an attempt to enhance the net social welfare benefits of the services provided by financial intermediaries, safety and soundness regulation requires a DI to hold a minimum level of cash reserves against deposits.

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Question 5

Because the average maturity of assets and the average maturity of liabilities are often different on an FI's balance sheet, the FI is exposed to liquidity risk.

Accepted Answer

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Question 6

Graphically explain the differences between the flow of funds in an economy without financial intermediaries and the flow of funds in an economy with financial intermediaries.

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Question 7

Why are financial institutions special? Give three concrete examples.

Accepted Answer

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Quiz 1: Why Are Financial Institutions Special