The process of matching borrowers and lenders performed by the financial system
A)greatly reduces the chances of inflation.
B)is plagued by the double coincidence of wants problem.
C)increases the economy's ability to produce goods and services.
D)occurs only through financial intermediaries.

Question

Quizplus · Accepted Answer

The matching of borrowers and lenders performed by the financial system increases the economy's ability to produce goods and services by facilitating the flow of funds from savers to investors. This enables businesses and entrepreneurs to obtain the necessary capital to finance their operations and create jobs and output. The process also contributes to financial deepening and development by promoting financial inclusion and innovation. While the double coincidence of wants problem (B) can sometimes be a challenge for barter trades, it is not relevant to the financial intermediation process. The choice of (A) is not accurate, as the matching of borrowers and lenders is not directly related to the level of inflation in the economy. Finally, (D) is not correct either, as borrowers and lenders can also interact directly without the need for intermediaries, such as in the case of direct public offerings.

The Process of Matching Borrowers and Lenders Performed by the Financial