Final answer:
Financial intermediaries benefit from risk-sharing services by diversifying risk and attracting various depositors. The FDIC further stabilizes the system, allowing banks to efficiently allocate resources and reduce transaction costs, earning profits through interest rate differentials.
Step-by-step explanation:
Financial intermediaries like banks benefit from providing risk-sharing services by enabling a diversification of risk across various depositors and borrowers. This diversification reduces the overall risk to any single entity, including the intermediary itself. By offering different types of accounts, such as savings accounts and certificates of deposit, banks can attract a wide range of depositors, each with differing risk profiles and liquidity preferences. Furthermore, under the Federal Deposit Insurance Corporation (FDIC), banks purchase insurance to protect against the potential risk of bank failures, further enhancing the stability of the financial system for both the intermediaries and their customers.
Banks earn profits by charging higher interest rates on loans than the interest rates paid to depositors. Their key role in the economy is to efficiently allocate financial resources between savers and borrowers, reducing transaction costs and contributing to the overall economic activity.