Question

Distinguish between the three ways to transfer capital in the Economy

Answer 1

Answer : there are 3 ways to transfer the capital in an economy such as financial intermediaries, direct transfer of money and securities and investment banking houses.

1 investment banking houses : if there is a company who is losing their money and have a need for funds so he will raise the money through investment banking houses by selling their securities so that they will get the money quickly.

2. Financial intermediaries: it workes between savers and borrowers. Small savers who save their funds and it provides small savers funds to borrowers. Finalcinal intermediaries such as banks, mutual funds, brokers, insurance companies and credit unions .

3.Direct transfer of money: people have the access of transferring their money directly into banks accounts. Government is transferring the money directly into banks account.