Practicing Success
Practicing Success
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| Which of the following is correct? |
There are two major alternative mechanisms through which allocation of funds can be done: via banks or via financial markets Households can deposit their surplus funds with banks, who in turn could lend these funds to business firms. Households can buy the shares and debentures offered by a business using financial markets. All of the above |
| All of the above |
| There are two major alternative mechanisms through which allocation of funds can be done: via banks or via financial markets. Households can deposit their surplus funds with banks, who in turn could lend these funds to business firms. Alternately, households can buy the shares and debentures offered by a business using financial markets. The process by which allocation of funds is done is called financial intermediation. Banks and financial markets are competing intermediaries in the financial system, and give households a choice of where they want to place their savings. |
