9 Questions
What is the main economic function of FIs?
To facilitate fund flows between households and corporations
Why is it likely that each household would prefer to leave monitoring to others in an economy without FIs?
Monitoring actions are too expensive for households to undertake
What is the likely outcome of a lack of monitoring in an economy without FIs?
Decreased attractiveness and increased risk of investing in corporate debt and equity
Why might households choose to hold cash over long-term securities?
To finance consumption expenditures in the near future
What is the primary reason why household savers prefer to hold the financial claims issued by FIs rather than those issued by corporations?
FIs provide liquidity services, which allow savers to easily convert their financial claims into cash
What is the purpose of financial intermediaries in the economy, according to the text?
To intermediate between the household and corporate sectors
What is the main function of FIs acting as a pure broker?
Providing information and transaction services
What is the primary reason why household savers prefer the financial claims issued by FIs over those issued by corporations?
Lower monitoring costs
What is the asset-transformation function of FIs?
Purchasing primary securities
"Financial Intermediaries: The Backbone of Economic Function - Test Your Knowledge!" Take this quiz to understand the crucial role of Financial Intermediaries (FIs) in the economy. Explore a hypothetical world where FIs do not exist and learn the impact it would have on households and corporations. Test your knowledge on how FIs act as middlemen, connecting savers and borrowers and facilitating economic growth. Sharpen your understanding of the various types of FIs and their functions with this informative quiz!
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