all financial transactions involve intermediaries. True or False?

Expert Solution

The statement is false because not all transactions involve intermediaries.

A financial transaction is the transaction which involves buying or selling of assets, goods and services or borrowing and lending of funds etc. Any transaction which has a monetary dimension is a financial transaction. Intermediaries facilitate the transaction between the buyer and seller by acting as a link between the two. For example Banks act as an intermediary between the borrowers and lenders. People deposit their money in banks and then banks lend this money to those who require funds. Similarly real estate broker negotiates the sale agreements between the buyers and sellers of real estate property.

However not all financial transactions require intermediaries. When one who needs to borrow some money directly contacts the lender and gets the loan, then it is a transaction which does not require an intermediary. Suppose a person needs potatoes for the meal. Now she can either go to supermarket to buy those potatoes or she can directly contact the farmer who is growing potatoes in her field. In the first case, it will be a financial transaction involving an intermediary while in second case it does not involve intermediary. A potato chips factory might directly buy the potatoes from the farmers.

Rahul Sunny answered 1 year ago

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