Which of the following is an example of financial intermediation?
A)John buys shares of stock issued by a fast food company.
B)A foreign government buys bonds issued by the U.S.Treasury.
C)Susan makes a deposit at a bank and the bank uses this money to make an auto loan to Ferguson.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Financial intermediation involves the process of channeling funds between lenders and borrowers. In this case, Susan (lender) deposits her money with the bank (financial intermediary) which then lends the money to Ferguson (borrower) in the form of an auto loan. Therefore, option C is an example of financial intermediation. Option A is not an example of financial intermediation as John is buying shares directly from the fast food company and not through a financial intermediary. Option B is not an example of financial intermediation as the foreign government is buying bonds directly from the U.S. Treasury and not through a financial intermediary. Option D is incorrect as option C is the correct answer.

Which of the Following Is an Example of Financial Intermediation