Chapter 3 · Question 3
How do banks use deposits to provide credit?
Q3
How do banks use deposits to provide credit?
Answer Revealed
Direct Answer:
Banks accept deposits from people and keep only a small part as cash for withdrawals. The remaining deposits are used to give loans to borrowers. This links savers and borrowers and supports economic activity.
Simple Explanation
Banks accept deposits from people and keep only a small part as cash for withdrawals. The remaining deposits are used to give loans to borrowers. This links savers and borrowers and supports economic activity.
Exam-Ready Structure
Banks accept deposits from people and keep only a small part as cash for withdrawals. The remaining deposits are used to give loans to borrowers. This links savers and borrowers and supports economic activity.
Key Points
- Banks accept deposits from people and keep only a small part as cash for withdrawals.
- The remaining deposits are used to give loans to borrowers.
- This links savers and borrowers and supports economic activity.