Question

(a) Describe Commercial Bank.(b) List three functions of commercial bank.(c) Explain one way commercial bank creates money.

Answer 1

Answer:

a)Describe Commercial Bank

A commercial bank is a type of financial institution that accepts deposits, offers checking account services, makes various loans, and offers basic financial products like certificates of deposit (CDs) and savings accounts to individuals and small businesses

b) List three functions of commercial bank

• Accepting deposits: The most significant and traditional function of commercial bank is accepting deposits from the public. ...

• Providing loans

• Credit Creation

• Transfer of funds

c)Explain one way commercial bank creates money

Commercial banks make money by providing loans and earning interest income from those loans. ... Customers who deposit money into these accounts effectively lend money to the bank and are paid interest. However, the interest rate paid by the bank on money they borrow is less than the rate charged on money they lend.

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