The financial institutions play an important role in transferring the savings of the individuals to the investments by businesses.Which of the following correctly states this transfer?
A)banks collect the savings and invest it in the stock market.
B)banks collect the savings, rewarding the savings by interest and dividend payments and, lend the funds to businesses who in turn buy equipment, factories and capital goods.
C)banks collect the savings and lend the funds to the government who in turn redistribute it through different kinds of subsidies.
D)financial institutions do not have a major role in this process.

Question

Quizplus · Accepted Answer

Financial institutions, such as banks, collect the savings of individuals and reward them with interest and dividend payments. They then lend these funds to businesses who use them to buy equipment, factories, and other capital goods to expand their operations. This transfer of savings to businesses is essential for economic growth and development. The other options in the question (A, C, and D) do not accurately describe this process.

The Financial Institutions Play an Important Role in Transferring the Savings