A Bank Lending Depositors' Money to a Local Business and a Pension

question 16

Multiple Choice

A bank lending depositors' money to a local business and a pension fund investing contributions in shares of a company are similar financial activities in that

• A)both involve the use of financial markets.
• B)both involve funds being channeled from savers to borrowers through financial intermediaries.
• C)both involve a reduction in the overall level of liquidity in the financial system.
• D)both involve in an increase in the overall level of risk in the financial system.

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Definitions:

Indirect Expenses

Costs that are not directly attributable to the production of goods or services, such as administrative and marketing expenses.

Profitability

The degree to which a business or activity yields profit or financial gain.