Which of the following best describes the role of banks in the loanable funds market?
A) Banks own the supply of loanable funds and distribute them to borrowers.
B) Banks act as a nonprofit middleman whose primary goal is to facilitate trade in the loanable funds market.
C) Banks act as profit-seeking institutions,taking the supply of loanable funds from households and distributing them to borrowers.
D) Banks are the primary demanders of loanable funds and thus have an important role in setting interest rates.

Question

Quizplus · Accepted Answer

Banks act as profit-seeking intermediaries between lenders and borrowers in the loanable funds market. Banks accept deposits from households and institutions, which they then distribute as loans to borrowers. The difference between the interest rate at which banks lend and borrow funds is their profit margin. Therefore, the choice that best describes the role of banks in the loanable funds market is C.

Which of the Following Best Describes the Role of Banks