Lines of Credit Provided by Financial Intermediaries

question 48

Multiple Choice

Lines of credit provided by financial intermediaries:

• A) decrease liquidity for customers but increase income for the intermediary.
• B) are pre-approved loans that can increase liquidity and lowering transaction costs.
• C) are costly for intermediaries to provide so are only available to large commercial customers.
• D) require deposits in the intermediary that equal or exceed the amount of the line of credit.

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Definitions:

Monopolistic

Pertaining to a market structure characterized by a single seller who has significant control over the market and prices.

Monopolistically Competitive

A market structure characterized by many firms selling similar but not identical products, allowing for some degree of market power and product differentiation.

Five Forces Model

A model developed by Michael Porter that helps us understand the five competitive forces that determine the level of competition and profitability in an industry.

Competitive Forces

Refer to the various external factors that influence the level of competition in an industry, impacting how businesses operate and compete. This includes rivals, threat of new entrants, supplier power, buyer power, and threat of substitute products or services.