Answer to Question #130018 in Macroeconomics for ntapi

Question

in the circular flow of income and spending, financial institutions....

1. act as an intermediary between those who have surplus funds and those who have deficit funds.
2. are not always useful, as households generally spend all their available funds.
3. create an injection into the flow by collecting savings from participants with surplus units only; therefore, there is no need to provide funds to deficits units.
4. generally exist to collect investment spending and transform it into savings.

Answer 1

3)create an injection into the flow by collecting savings from participants with surplus units only; therefore, there is no need to provide funds to deficits units.