Question

Direct financing works in multiple ways. Put the following events in order to show how direct financing can strengthen an economy’s GDP and financial standing.
A. Start by clicking the first item in the sequence or dragging it here ABC Company repays its bond debt to Tom and Sally.
B. GDP increases.
C. ABC Company uses the money from the sale of the bonds to hire two more workers.
D. ABC Company increases its monthly production level.
E. Tom and Sally buy $10,000 worth of bonds from ABC Company.

Answer 1

Answer: E,C,D,B.

Direct financing strengthen an economy's GDP because they come without any interest cost or rate and are directly invested to increase the level of production or output of a business .

Explanation:

Direct financing occurs when money is borrowed from the financial market without using a third party or an intermediary, this is done in other to avoid indirect financing and it's high borrowing cost effect where the overall cost of the loan can be increased through interest rate.

Direct financing is when shares or securities are sold by a borrower in order to raise money and avoid interest rates that comes with using intermediaries or third party services.

Note: Those intermediaries are banks.