SEU (surplus economic unit) and DEU (deficit economic unit)
What can a financial institution frequently do for a surplus economic unit that it would encompass difficulty doing for itself if the SEU (surplus economic unit) were to deal directly with a DEU (deficit economic unit)?
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SEUs don’t usually have the much knowledge to determine whether deficit economic units will make good on their obligations, so it is quite difficult for them to foresee when a would-be deficit economic unit will not be able to pay what it owes. Such a failure is likely to be disturbing to a SEU that has lent a quite large amount of money.
A financial institution can very well predict who can pay and who can’t. It is also good in having greater financial resources and sometimes absorbs a loss when people fail to pay.
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