The Role and Structure of Modern Banking
Banking refers to the business of accepting deposits and granting credit. Banks serve as financial intermediaries, connecting savers (those with surplus capital) with borrowers (those who need capital for investment or consumption).
Capital Allocation: By assessing creditworthiness and lending to productive enterprises, banks direct scarce capital to its most efficient uses, promoting economic development.
Money Multiplier Effect: Through the fractional reserve system, banks increase the money supply, which fuels spending and investment in the economy.
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