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Why does an economy require financial intermediaries?
An economy requires financial intermediaries because they help facilitate the flow of funds between savers and borrowers. These intermediaries provide services such as pooling funds, reducing risk, and providing liquidity, which are essential for efficient allocation of resources and promoting economic growth.
What do financial intermediaries do?
I have to separate it into to parts. The financial intermedairies which are banks that borrow their customers money and pay interest on that borrowed money to lend to other customers with the plan of making a return on their investments for them and their customers. Domestic to me would be the personal home needs such as, a individual (not business) that is looking for a depository institution where he or she can gain interest on the deposited funds or for a bank to finance them so they can purchase a home, car, etc. I am still researching, but this is what I understand of what I have already researched. Of course I am a student, not an educator, so this is just my opinion.
Why are Financial intermediarys important to the economy?
financial intermediary is one of the participants in the financial market. the other two are fund's providers and fund's users. financial intermediaries are important because they are institution that bring lenders and borrower together. savers with excess funds will deposits funds with financial intermediaries who will then lend them to fund deficit units. examples include commercial banks, insurance companies, and investment companies. thus, financial intermediaries can be regarded both as a provider and as a user of funds. apart from bringing fund-deficit and fund-surplus together, another function provided by financial intermediaries is investment banking. frequently, companies may need to obtain large amounts of funds direct from the public. this involve issues of securities, either in the form of debt or equity. the service of the merchant banker is required for this purpose. the banker is directly involved in floating new securities to the public besides providing advice and underwriting services. when a banker underwrites an issues, it means that any shares not bought by investors will be bought by the banker. the underwriting function ensures that the corporation receives the total amount of funds it want to raise.
Contribution of real sector to an economy?
the business activity of financial intermediaries contributes to profits the economy bags as well as businesses in all other business related markets. these activities helps the economy to grow
Is most financing in the US done through the direct or the indirect markets?
Most of the financing in the United States, however, is done indirectly through financial intermediaries who substitute their credit for the credit of the borrower (user) of funds.
