EBK THE ECONOMICS OF MONEY, BANKING AND
EBK THE ECONOMICS OF MONEY, BANKING AND
5th Edition
ISBN: 9780134734545
Author: Mishkin
Publisher: YUZU
Question
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Chapter 8, Problem 2Q
To determine

How can economies of scale help in explaining the existence of financial intermediaries?

Concept Introduction:

Small savers and investors could not invest in many securities or debt instruments because of high transaction cost. The financial intermediaries therefore, lost many good customers. Also, such investors could not diversify their portfolio by investing in different instruments. This implies transaction and information cost as a hurdle for the financial intermediaries.

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