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How bank act as a mediator for borrowers and depositors?
The banks mediate between those who want to deposit surplus money and those who want money. To the depositors banks give them interest and from the borrowers they charge a higher interest rate. The difference between what they charge from borrowers and what they offer to the depositors is the main source of their income.
Why were banks one of the first institutions to the feel the effects of the stock market crash?
Frightened depositors feared for their money and tried to withdraw it from their banks.
What do bank panic mean?
a situation in which many banks fail because they are not able to meet the demands of their depositors for cash
What is a run on the bank?
It can happen that the depositors lose confidence in a banks ability to look after their money. if this happens in a big way most of the depositors demand the money they have in their accounts. this is known as a run on the bank. No bank can withstan a run on it without outside assistance.
Can banks invest in mutual funds?
They can invest their own income/profits in a mutual fund but they cannot invest the depositors money in a mutual fund
How does the federal reserve make sure that banks are protecting depositors money?
In an efforts to protect depositors money the Federal Reserve requires that banks follow many rules in their day to day business. They require the banks keeps a certain amount of cash on hand at all times and guarantee depositors accounts up to two hundred thousand dollars per account.
How bank act as a mediator for borrowers and depositors?
The banks mediate between those who want to deposit surplus money and those who want money. To the depositors banks give them interest and from the borrowers they charge a higher interest rate. The difference between what they charge from borrowers and what they offer to the depositors is the main source of their income.
Why were banks one of the first institutions to the feel the effects of the stock market crash?
Frightened depositors feared for their money and tried to withdraw it from their banks.
Did US depositors lose money in the bank failures during the great depression?
YES. Banks were using depositors' money to invest in the stock market. When the market crashed everything vanished.
Is the main purpose of Government regulation of Commercial Banks to protect its stockholders or its depositors Why?
provide protection of the people
What do bank panic mean?
a situation in which many banks fail because they are not able to meet the demands of their depositors for cash
Is a job working in a Bank a Government job?
As the vast majority of banks are Corporations owned by stockholders or their depositors not governments, no. But there are a few government owned banks, a job in one of those banks would be a government job.
What insured banks during the great depression?
There was no insurance. That's why their depositors lost all their money. This was the motivation for the establishment of the FDIC.
What is a run on the bank?
It can happen that the depositors lose confidence in a banks ability to look after their money. if this happens in a big way most of the depositors demand the money they have in their accounts. this is known as a run on the bank. No bank can withstan a run on it without outside assistance.
Can banks invest in mutual funds?
They can invest their own income/profits in a mutual fund but they cannot invest the depositors money in a mutual fund
Why did millions of Americans lose their savings during the great depression?
Banks did not have enough money to pay all withdrawing depositors, so they shut down.
How does a bank make most of its profit on it business?
By paying out less in interest on deposits than it earns in interest on loans
