Why Do Financial Intermediaries Aid in the Efficient Operation of the Economy

question 183

Multiple Choice

Why do financial intermediaries aid in the efficient operation of the economy?

• A) Without them it would be difficult for small savers to lend to large borrowers.
• B) They lend funds to businesses at a zero interest rate.
• C) They print currency.
• D) They regulate the money supply.
• E) They engage in open market operations.

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Definitions:

Internal Growth Rate

The maximum rate at which a company can expand using only internal financing sources, without external financing.

Dividend Payout Ratio

The fraction of net earnings a firm pays to its shareholders as dividends, expressed as a percentage of the company's total earnings.

Retention Ratio

The proportion of net income that is retained by a company rather than distributed to its shareholders as dividends, indicating how much profit is reinvested.

Net Income

The amount of money remaining after all operating expenses, taxes, and interest have been deducted from total revenue.