Financial Intermediaries

question 22

Multiple Choice

Financial intermediaries:

• A) act as a third party by holding a portfolio of assets and issuing claims based on them to savers.
• B) issue claims on future cash flows of individual borrowers directly to lenders.
• C) transmit funds directly between lenders and borrowers.
• D) usually provide lenders with lower returns than other financial institutions.

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Definitions:

North American Free Trade Agreement

A trilateral trade block agreement made by Canada, Mexico, and the United States to reduce trading costs and increase business investments.

Infant Industries

Industries in their early stage of development, which may be protected by the government from international competition to allow them to grow.

Public Choice Theory

A framework analyzing the decision-making processes within political and public institutions, focusing on the roles of incentives and individual behaviors.