Question

Banks are efficient medium of exchange. Support statement with arguments

Answer 1

Banks keep only a small proportion of their deposits as cash with themselves. For eg, banks hold about 15 per cent as cash. This is kept as provision to pay the depositors. Since, on any particular day, only some of its many depositors come to withdraw the cash, the bank is able to manage it. Banks make use of the deposits to meet the loan requirements of people. This way banks intermediate between those who have surplus funds and those who are in need of funds.

Answer 2

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