Answer :
Final answer:
Financial intermediaries like banks provide macroeconomic benefits including economic growth, low unemployment, and low inflation by acting as intermediaries between savers and borrowers. They also evaluate borrower creditworthiness, reducing risk and ensuring efficient credit allocation.
Explanation:
Financial intermediaries, such as banks, provide major macroeconomic benefits. They act as intermediaries between savers and borrowers, thus helping in the allocation of funds in an economy. Mainly, their roles contribute to economic growth, maintaining low unemployment, and keeping low inflation.
For instance, banks collect and mobilize savings from individuals and lend these funds to businesses, which results in capital deepening and increased productivity. Additionally, financial intermediaries evaluate the creditworthiness of borrowers, thus reducing risk and ensuring an efficient allocation of credit.
On the other hand, the government plays a significant role in the credit allocation process. In cases where markets fail to allocate capital or technology efficiently for overall societal benefit, the government steps in to correct these failures. Furthermore, governments can guide or influence markets toward certain outcomes, such as promoting certain sectors through policy incentives or investing in areas of strategic importance for societal impact and capital deepening.
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