BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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interest, payments
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loans, interest
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payments, loans
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debt, loans
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Detailed explanation-1: -Most of the money in our economy is created by banks, in the form of bank deposits – the numbers that appear in your account. Banks create new money whenever they make loans. 97% of the money in the economy today exists as bank deposits, whilst just 3% is physical cash.
Detailed explanation-2: -Banks earn money in three ways: They make money from what they call the spread, or the difference between the interest rate they pay for deposits and the interest rate they receive on the loans they make. They earn interest on the securities they hold.
Detailed explanation-3: -FIRST, banks create money when doing their normal business of accepting deposits and making loans. When banks make loans they create money. remember from chapter 12 that money (M1) is currency (coins and bills) AND checkable deposits.