What can financial institution often do for deficit econmic, Financial Management

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What can a financial institution often do for a deficit economic unit (DEU) that it would have difficulty doing for itself if the DEU were to deal directly with an SEU?

SEUs usually want to deliver a small amount of funds, while DEUs usually want to acquire a large amount of funds.  Thus it is often difficult for excess and shortage economic units to come together on their own to arrange a mutually valuable exchange of funds for securities.  A financial institution can get involved and save the day.  A bank loan and savings or insurance company can take in small amounts of funds from many individuals form a large pool of funds and then use that large pool to purchase securities from individual businesses and governments.  (This is just one instance of the beneficial things financial institutions do for DEUs)

 

 

 


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