a)What is meant by market failure? b)Why does increased volatility in financial markets with respect to the price of financial assets,interest rates,and exchange rates foster financial innovation? c)Why is the holding of a claim on a financial intermediary by an investor considered an indirect investment in another entity? d)Explain how a financial intermediary reduces the cost of contracting and information processing.
a)What is meant by market failure? b)Why does increased volatility in financial markets with respect to the price of financial assets,interest rates,and exchange rates foster financial innovation? c)Why is the holding of a claim on a financial intermediary by an investor considered an indirect investment in another entity? d)Explain how a financial intermediary reduces the cost of contracting and information processing.
Chapter12: Money And Banking
Section: Chapter Questions
Problem 3E
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a)What is meant by market failure?
b)Why does increased volatility in financial markets with respect to the price of financial assets,interest rates,and exchange rates foster financial innovation?
c)Why is the holding of a claim on a financial intermediary by an investor considered an indirect investment in another entity?
d)Explain how a financial intermediary reduces the cost of contracting and information processing.
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