The primary economic function of financial intermediaries is to help allocate scarce resources to desired uses.

Question

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Financial intermediaries (such as banks, investment firms, and insurance companies) play a crucial role in the economy by channeling funds from savers to borrowers, thereby facilitating the efficient allocation of capital. This intermediation function allows for a more efficient use of resources, as savers can earn a return on their investments while businesses and individuals can access the capital they need to grow and innovate.

The Primary Economic Function of Financial Intermediaries Is to Help