An International Monetary Fund Factsheet made the following observation regarding sound financial systems: "A country's financial system...helps channel savings into investments, thereby supporting economic growth."
Source: Financial System Soundness, International Monetary Fund Factsheet, March 27, 2019.
Explain how the financial system channels savings into investments:
a. Firms use their retained profits to reinvest in the firms rather than giving the profits to their owners.
b. Financial intermediaries act as go between for firms to help them sell their stocks and bonds.
c. Savers provide funds to firms by depositing their savings with financial institutions like banks and by purchasing the firm's stocks and bonds.
d. Borrowers pay back funds to financial intermediaries, and that financial intermediary gives those funds to the savers.