The Function That Banks Perform by Obtaining Funds from Households

question 211

Multiple Choice

The function that banks perform by obtaining funds from households, businesses, and governments and lending these funds to other households, businesses, and governments is known as

• A) financial intermediation.
• B) lending intermediation.
• C) fiscal intermediation.
• D) liquidity intermediation.

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Definitions:

Adjusted Gross Income

An individual's total gross income minus specific deductions. It's used as the basis for calculating taxable income.

Tax-deferred

An investment in which taxes on the principal and/or earnings are delayed until the funds are withdrawn, commonly seen in retirement accounts like 401(k)s and IRAs.

Accumulation Period

The time frame in which an investment, such as a annuity, accumulates interest or income before disbursement or annuitization.

Distribution Period

The time frame over which payments are made from an investment, retirement plan, or insurance policy to the beneficiary.