Question

Ceteris paribus, financial intermediation would cause interest rates to A.diverge between urban and rural markets b....

Ceteris paribus, financial intermediation would cause interest rates to

A.diverge between urban and rural markets

b. converge between urban and rural markets.

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Answer #1

Financial intermediation is a productive activity in which an institutional unit incurs liabilities on its own account for the purpose of acquiring financial assets by engaging in financial transactions on the market; the role of financial intermediaries is to channel funds from lenders to borrowers by intermediating.

Because of financial intermediation the rural markets would have easier access to funds.

The correct option is therefore

b. Converge between rural and urban markets.

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