An International Monetary Fund Factsheet made the following observation regarding sound financial systems: "A country's financial system ... help[s] channel savings into investment, thereby supporting economic growth." Source: "Financial System Soundness," International Monetary Fund Factsheet, March 27, 2019. a. Briefly explain how the financial system channels savings into investment. A. Borrowers pay back funds to a financial intermediary, and that financial intermediary gives those funds to savers. B. Financial intermediaries act as go-betweens for firms to help them sell stocks and bonds to savers. C. Firms use their retained earnings (their savings) to reinvest in the firm rather than paying the firm's owners. D. Savers provide funds to firms by buying the firms' stocks and bonds and by depositing funds in banks. Aren't savings already investment? If not, what type of investment is the Factsheet referring to? A. No, investment, as used in this context, refers to expenditure on new capital and new technology. B. No, investment, as used in this context, refers to the funds available to firms after paying all their expenditures. C. Yes, as used in this context, any time you deposit money into your savings account, you are making an investment. D. Yes, saving and investment are essentially the same-investment is just another type of saving.

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