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Chapter 2: Q.16 (page 97)

鈥淚n a world without information costs and transaction costs, financial intermediaries would not exist.鈥� Is this statement true, false, or uncertain? Explain your answer.

Short Answer

Expert verified

Yes. In a world without transaction cost and information cost there will be no intermediary.

Step by step solution

01

Step 1. Introduction

Perfect information implies that economic agents in the market possess complete and immediate knowledge of all market prices, their own utility, and their own cost functions.

02

Step 2. Explanation

If therearen't any informational or transactions costs, human beings may want to make loans to every different for gratis and could accordingly don't have any want for economic intermediaries

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