Question

Q1 How do banks mediate between those who have surplus money and those who need money? how does it earn profit? Q2 Describe the role of banks in the economy of a country.

Answer 1

They ask people who have surplus money by asking to invest in them..
by this way the bank provides money to the needy ..if they're good ..
I think they don't get that much profit but they get some profit..

Answer 2

Explanation:

A bank mediates between those who have surplus money and those who need money by allowing both to open accounts with it. Banks only keep about 15% of cash reserves to provide to people who come to withdraw money on a daily basis. Those with surplus money are encouraged to invest with the bank and are paid a certain rate of interest for the same. Those who need loans are required to pay an interest on their loans. The difference between payment to lenders and receipt from borrowers comprises the bank’s earnings. Thus, the bank acts as a beneficiary for those with surplus money as well as those who need money.