The island of Utopia has a very unusual economy. Everyone on Utopia knows everyone else and knows all about the firms they own and operate. The financial system is well developed on Utopia. Everything else being equal, how would you expect the mix on Utopia between internal finance (where companies use their own funds such as retained earnings) and external funding (where companies obtain funds through financial markets) to compare with other countries? What role would financial intermediaries play in this economy?
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