Question

What do banks do with deposits?

• A. Banks give loans.
• B. Banks distribute the deposits to the poor.
• C. Banks keep the deposits idle.
• D. Banks pay salaries.

Answer 1

The correct option is A Banks give loans.

Banks lend deposits as loans, and collect interest for these loans. The interest they collect from borrowers is more than the interest they pay their depositors. The difference between these interest amounts is the profit generated by the banks.