Answered: What are some factors to consider when…

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter14: Money And Banking

Section: Chapter Questions

Problem 9AA

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What are some factors to consider when choosing a bank?

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Banks are the financial institutions that are very important in every economy. They are the main players who create the money out of the money supplied by the monetary authority. They accept the deposits from the public and provide an interest rate to the depositors. The money will be used by the banks to create loans to the public. Thus, the loan creation is an important function of bank. Banks will charge a rate of interest on the loans provided. The rate of interest charged on loans will be higher than that of the interest rate provided to the depositors. This difference between the two interest rates becomes the profit or revenue of the banks.

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