Which are the roles of a bank? Check all that apply. a. Storing and holding money

Which are the roles of a bank? Check all that apply.

a. Storing and holding money

b. Making purchases to create profits

c. Lending money

d. Investing in the economy

e. Creating money for the economy

Answer: The correct answer is a, c, d and e.

Banks perform several important functions in the contemporary world economy. Some of the functions of money include saving, keeping, or depositing it for people and companies to ensure secure storage and easy transactions. Banks also grant credit to borrowers – thus, helping to propel economic activity through the right of investments and purchases. On the same note, through offering business finances, and participating in financial activities, banks also fund the economy. Notably, through the operation of the fractional reserve banking system, which allows banking institutions to extend more credit than the magnitude of customer deposits banking institutions build money for the economy. This phenomenon is called credit creation and plays a crucial role in money supply and as a result, plays a significant role in boosting up an economy. Although the banks may adopt activities that may help them to earn profits, the role defined by option b (making the purchases to create the profits) is not characteristic of the traditional type of banks. Essentially, banks make their revenues from interests on loans, and other charges for services as well as investment returns as opposed to the buying and selling of merchandise.