Distinguish between direct finance and indirect finance. Which of these is the most important source of funds for corporations in the United States?
What will be an ideal response?
With direct finance, funds flow directly from the lender/saver to the borrower. With indirect finance, funds flow from the lender/saver to a financial intermediary who then channels the funds to the borrower/investor. Financial intermediaries (indirect finance) are the major source of funds for corporations in the U.S.
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If the monetary authorities persistently expand the money supply at a rapid rate, the probable result will be
a. inflation. b. high nominal interest rates. c. rapid growth of real GDP. d. both a and b.
If aggregate demand shifts left, then in the short run
a. the price level and real GDP both rise. b. the price level rises and real GDP falls. c. the price level falls and real GDP rises. d. the price and real GDP both fall.