Question

How are bank deposits useful to the public?

• A. Bank deposits form the basis for credit creation
• B. Bank deposits with banks affect the supply of money
• C. Banks encourage savings through advertisement
• D. Bank deposits from the base for cash reserves

Answer 1

The correct option is A

Bank deposits form the basis for credit creation

Bank deposits form the basis for credit creation. When a bank accepts cash from a customer and opens a deposit account, it is called a primary deposit. It is out of these primary deposits that the bank grants loans. Hence, banks play an active role in credit creation.