Answer to Question #130675 in Macroeconomics for Valerie

Question

Choose the correct answer

In the circular flow of income and spending, financial institutions

1. Act as an intermediary between those who have surplus funds and those who 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's no need to provide funds to deficit units

4. Generally exist to collect investment spending and transform it into savings

Answer 1

In the circular flow of income and spending, financial institutions act as an intermediary between those who have surplus funds and those who deficit funds.

So, the correct answer is 1.