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JAMB Economics 1978 Question 8

Question 8

Financial Institutions

A commercial bank is unique in that it is the only institution that

  1. A.makes loans to private people and businessmen
  2. B.accepts deposits
  3. C.can store people's valuables
  4. D.can transfer money from one place to another for its customers
  5. E.saves money through the granting of credits.
Show the answer and explanation

Answer: E (saves money through the granting of credits.)

Explanation

Many institutions lend, take deposits or keep valuables, but only commercial banks create new money (bank deposits) when they grant loans. Option E describes this credit creation.