/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q.12 Why do we call a bank a financia... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 14: Q.12 (page 352)

Why do we call a bank a financial intermediary?

Short Answer

Expert verified

The bank is called financial intermediary because it connects borrowers to savers.

Step by step solution

01

Step 1  : Concept Introduction

Bank gathers money from the depositors and lends it out to the borrowers and thus acts as financial intermediary between the two parties.

Intermediary is known as a middleman in simple words who facilitates financial transaction between two parties.

02

Explanaton of solution 

An middleman is the one who stands among the two different events. Banks are called financial intermediary because it operates between a depositor who deposits their money in the bank and borrower who receives a loan from bank. In this, when a bank gathers money from the depositor and lends that money to the borrower as a loan, bank plays an intermediate role. Bank consolidates deposits and transfers them into loans. Thus, bank is called financial intermediary because it connects borrowers to savers.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What are a bank's assets? What are its liabilities?

If you are out shopping for clothes and books, what is easiest and most convenient for you to spend: M1 or M2? Explain your answer.

Humongous Bank is the only bank in the economy. The people in this economy have 20\(million in money, and they deposit all their money in Humongous Bank.

a. Humongous Bank decides on a policy of holding\)100reserves. Draw a T-account for the bank.

b. Humongous Bank is required to hold \(5%of its existing\)20million as reserves, and to loan out the rest. Draw a T-account for the bank after it has made its first round of loans.

C. Assume that Humongous bank is part of a multibank system. How much will money supply increase with that original$19million loan?

Explain why you think the Federal Reserve Bank

tracks M1 and M2.

How can a bank end up with negative net worth?
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.