Financial intermediation is the process of:
A) settling disputes between borrowers and lenders.
B) advising corporations on whether to expand using debt or equity.
C) transferring funds from savers to borrowers.
D) converting from a barter economy to a money economy.

Question

Quizplus · Accepted Answer

Financial intermediation involves transferring funds from savers to borrowers. Financial intermediaries act as middlemen between the two parties, pooling funds from savers and lending them out to borrowers in the form of loans or investments. This process helps to allocate financial resources efficiently and reduces the cost of obtaining funds for borrowers. Option A is incorrect because settling disputes between borrowers and lenders is the function of legal intermediaries, such as lawyers and judges. Option B is incorrect because advising corporations on whether to expand using debt or equity is the function of investment banks and financial advisors. Option D is incorrect because converting from a barter economy to a money economy is the function of monetary authorities and policymakers.

Financial Intermediation Is the Process Of