Question

When savers deposit funds into banks, which then loan these funds to borrowers, it is called ________ finance.

Answer 1

Answer:  

Indirect finance

Explanation:  

Indirect financing is when lenders use indirect methods to raise capital from the capital market, such as via a financial institution. This is distinct from direct borrowing in which the issuer selling assets exclusively on the marketplace has a direct relationship to the financial markets.

In the situation of indirect funding, in the way of lower tax rates, the government gives advantage as a means to defend a specific interest instead of raising and reallocating tax income (that would be viewed by a government as a clear funding technique).