Final answer:
Finance serves to facilitate transactions and acts as intermediaries between savers and borrowers, as well as playing a vital role in capital formation by allocating savings based on interest and risk.
Step-by-step explanation:
The two primary roles filled by finance are the facilitation of transactions within the economy and the acting as intermediaries between savers and borrowers.
Through financial institutions, finance enables individuals and firms to efficiently sell and buy goods and services, pay employees, and save or borrow money.
As intermediaries, banks play a pivotal role in the financial capital market by connecting those who want to save money—thus supplying financial capital—with those who seek to borrow money for various purposes.
Additionally, finance is key in the process of capital formation. Savings in the economy lead to capital formation, which is fundamental for economic growth and development.
This capital is then allocated through the consideration of interest rates and risk, ensuring that savings are directed to their most productive uses.