Question

Describe key services that the financial system provides to savers. Question 17 options: Economies of scale of information Risk sharing Liquidity All of the above

Answer 1

The answer is all of the above.

Risk sharing, liquidity, and knowledge are the three main services that the financial system offers to both savers and borrowers.

First, people seek steady returns on their holdings.

Investors often maintain a portfolio, or collection of assets, that offers generally consistent returns (diversification).

Risk is a measure of how unpredictable the return on an asset is.

Liquidity is a measure of an asset's ease of movement to be transformed into cash.

In financial markets, the information contains facts about borrowers and expectations of returns on financial assets.

Key Services of the Financial System:

• Effective Payment System
• Intermediary to Investors and Borrowers
• Sharing of Economic Financial Risk
• Diversification
• Liquidity
• Financial Information

Hence, key services that the financial system provides to savers include all of the above.

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