Financial intermediaries reduce search and information costs.

Question

Quizplus · Accepted Answer

Financial intermediaries such as banks, mutual funds, and insurance companies act as middlemen between lenders and borrowers or between investors and securities issuers. They reduce search and information costs by collecting and analyzing information about potential borrowers or investment opportunities and by providing a platform for investors and borrowers to meet and transact. This helps to lower the costs of finding, evaluating, and monitoring investments, which can make financial markets more efficient and accessible.

Financial Intermediaries Reduce Search and Information Costs