When financial intermediaries deleverage,firms cannot fund investment opportunities resulting in
A)a contraction of economic activity.
B)an economic boom.
C)an increased opportunity for growth.
D)a call for government regulation.

Question

Quizplus · Accepted Answer

Financial intermediaries play a crucial role in mobilizing savings and allocating funds to borrowers, including firms seeking financing for investment opportunities. When these intermediaries deleverage or reduce their lending activity, firms may find it difficult to secure funding, resulting in a contraction of economic activity. This can lead to reduced employment, lower output, and weaker economic growth. Therefore, option A is the best choice.

When Financial Intermediaries Deleverage,firms Cannot Fund Investment Opportunities Resulting in