In 2 or 3 sentences, describe how money is channeled from savers to borrowers to investors.

The primary purpose of the financial markets is to route surplus reserves from people who have gathered from their salaries to people who need to finance their expenditure or corporations that require reserves to support capital investments. There are couple ways in which funds are routed from savers/donors to spenders/borrowers.

Direct Financing: Funds are loaned directly from savers to spenders. Indirect Financing: Where an intermediary i.e. bank is involved between donors and borrowers.

The borrower may chose to use the funds to invest in a business venture and thus be becomes an investor. Money is channeled through financial institutions such as banks. A saver saving with a bank account seeks to keep the money in the bank as it earns him interest.

Money is channeled through financial institutions such as banks. A saver saving with a bank account seeks to keep the money in the bank as it earns him interest. A borrower in need of a loan applies for a loan at the bank and if he is eligible, gets the loan at an interest rate. The borrower may chose to use the funds to invest in a business venture and thus be becomes an investor.

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The correct answer is: "throught the banking system".

Banks are the type of financial institutions which are in charge of collecting money from savers, who deposit their funds in these institutions, and of channelling it towards potential investors.

By law, banks are required to keep in cash a certain percentage of the money that economic agents have deposited (the reserve ratio), but they use the rest to grant loans to other customers. These customers are the borrowers/investors.

saving account is right

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