Intermediaries Must Perform Three Basic Functions

question 37

Essay

Intermediaries must perform three basic functions.Name these functions,and describe the activities involved in each function.

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Definitions:

Secondary Reserves

Assets that can be quickly converted into cash without losing value but are not held as cash, used by banks to meet short-term needs.

Government Securities

Financial instruments issued by the government to borrow money from investors, which typically include bonds, bills, and notes.

High-risk Investments

Investments with a greater potential for loss or significant fluctuation in value, often offering the possibility of higher returns.

Reserve Requirement

The reserve requirement is the minimum amount of reserves that banks must hold against deposits, set by monetary authorities to control the money supply.