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What are financial intermediaries? What economic function do they perform? Do they improve a standard of...

What are financial intermediaries? What economic function do they perform? Do they improve a standard of living?

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Answer #1

Financial intermediaries help in managing supply and demand of loanable fund . It helps in efficient allocation of savings and loans.They are bank, non banking financial corporation,etc.

Economic functions of financial intermediaries:
1. Default Risk intermediation: The help in giving loans to borrowers using putting risk on savers.

2 . Maturity intermediation: They help manage the mismatch with the maturities of deposit and loan.

3. Liquidity intermediation : Saving deposits are highly liquid where as loans are highly illiquid . They help in managing liquidity in economy.

Yes,they improve standard of living by minimzing risk and providing returns which increases value of money

Please Discuss in case of Doubt

Best of Luck. God Bless
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