Explain financial intermediaries relatively more effective

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Q. You take $100 you had kept under your mattress and deposit it in your bank account. If this $100 stays in the banking system as a reserve and if banks hold resource equal to 10 percent of deposits, by how much does the total amount of deposits in the banking system increase?

Q. Indirect finance is more important than direct finance in most countries in part because of information costs associated with lending. Explain why are financial intermediaries relatively more effective at reducing these costs?

Reference no: EM1347245

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