Why Are Banks Able to Offer Funds More Cheaply to Many

question 55

Multiple Choice

Why are banks able to offer funds more cheaply to many borrowers than can financial markets?

• A)Banks tend to be willing to settle for lower profits than are other lenders.
• B)Banks are less regulated than are financial markets, which lowers banks' costs of operating.
• C)Banks specialize in gathering information on the creditworthiness of borrowers and monitoring borrowers' activities.
• D)Financial markets are generally uninterested in making loans to small borrowers, because small borrowers usually cannot afford to pay the rates charged large corporations and other large borrowers.

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Definitions:

Economic Model

A simplified representation of economic processes used to predict economic behaviors.

Productive

Being productive pertains to the capacity or efficiency of producing a considerable amount or result, typically in the context of economic goods and services.

Benefit From Trade

The advantage gained by countries, firms, or individuals from engaging in exchange, usually resulting in access to a wider variety of goods or services at lower costs.

Opportunity Cost

The monetary loss of relinquishing the best subsequent option upon deciding.