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Financial intermediation describes which process?
ASavers lending straight to borrowers without a bank
BA government borrowing by issuing bonds to the public
CInstitutions standing between suppliers and users of funds
DA bank moving funds between its own branch offices
Answer & Solution
Correct answer: C. Institutions standing between suppliers and users of funds
1. Financial intermediation is the process in which financial institutions act as go betweens.
2. They stand between the suppliers of funds and the demanders of funds.
3. The institution accepts deposits from savers and invests them in products such as loans that are expected to produce a return.
4. A wealthy lender handing money straight to a borrower is direct lending, which is the case where no intermediary is used.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 15 "Understanding Money and Financial Institutions", section 15.3 U.S. Financial Institutions_
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