To understand the important role played by banks in the economy, we need to imagine a world without banks. REQUIRED: A. Explain how economic transactions between household savers of funds and corporate users of funds would occur in a world without financial intermediaries. Identify and explain three economic disincentives that probably would dampen the flow of funds between household savers of funds and corporate users of funds in an economic world without financial intermediaries. Identify and explain the two functions in which FIs may specialize that would enable the smooth flow of funds from household savers to corporate users. In what sense are the financial claims of FIs considered secondary securities, while the financial claims of commercial corporations are considered primary securities?
To understand the important role played by banks in the economy, we need to imagine a world without banks. REQUIRED: A. Explain how economic transactions between household savers of funds and corporate users of funds would occur in a world without financial intermediaries. Identify and explain three economic disincentives that probably would dampen the flow of funds between household savers of funds and corporate users of funds in an economic world without financial intermediaries. Identify and explain the two functions in which FIs may specialize that would enable the smooth flow of funds from household savers to corporate users. In what sense are the financial claims of FIs considered secondary securities, while the financial claims of commercial corporations are considered primary securities?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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To understand the important role played by banks in the economy, we need to imagine a world without banks.
REQUIRED: A. Explain how economic transactions between household savers of funds and corporate users of funds would occur in a world without financial intermediaries.
- Identify and explain three economic disincentives that probably would dampen the flow of funds between household savers of funds and corporate users of funds in an economic world without financial intermediaries.
- Identify and explain the two functions in which FIs may specialize that would enable the smooth flow of funds from household savers to corporate users.
- In what sense are the financial claims of FIs considered secondary securities, while the financial claims of commercial corporations are considered primary securities?
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