16-73 Which of the following observations concerning the intermediation approach is true?
A)It views FIs' outputs of services as having two underlying inputs.
B)Labor and capital are the only inputs.
C)It views the output as being produced by labor,capital and the funds used to produce intermediated services.
D)Premiums or reserves are viewed as an input in the banking and thrift industries.
E)None of the above.

Question

Quizplus · Accepted Answer

The intermediation approach views the output of financial institutions as being produced by labor, capital, and the funds used to produce intermediated services. This approach recognizes that financial institutions take in funds from savers and then use those funds to make loans or investments, which generate returns. Therefore, the funds themselves are considered an input in the production process. Option A is incorrect because the intermediation approach considers inputs to consist of labor, capital, and funds used to produce intermediated services. Option B is incorrect because the intermediation approach considers funds to be an input as well. Option D is incorrect because premiums and reserves are not typically considered inputs in financial intermediation.

16-73 Which of the Following Observations Concerning the Intermediation Approach