Banks perform the indispensable task of:
A)creating money without making loans.
B)absorbing the excess liquidity created by other financial institutions.
C)intermediating between surplus-spending parties and deficit-spending parties.
D)issuing risky deposits.
E)None of the options are correct

Question

Quizplus · Accepted Answer

Banks act as intermediaries between two groups of people - those who have excess money (surplus-spending parties) and those who need money (deficit-spending parties). The surplus-spending parties deposit their money in banks, which is then lent out to the deficit-spending parties in the form of loans. In this way, banks facilitate the flow of funds from savers to borrowers, and play a crucial role in the economy. Options A, B, and D are incorrect, as they do not accurately describe the role of banks.

Banks Perform the Indispensable Task Of