Question 35
Financial InstitutionsThe most important economic characteristic differentiating commercial banks from other financial institutions is their
- A.function as a safe and profitable store place for savings
- B.role in financing balance of payments deficits
- C.status as an intermediary between savers and borrowers
- D.ability to create and destroy money.
Show the answer and explanation
Answer: D (ability to create and destroy money.)
Explanation
Other financial institutions also link savers and borrowers, but only commercial banks create money: their loans become new deposits.