Choose the given statement is true/false:

Banks mediate between those who have surplus money and those who mediate money.

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True

False

answer is A.

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Detailed Solution

The given statement is true.
People with leftover cash deposit it into their accounts banks. The bank accepts these deposits and pays interest on them at a specific time interval. The banks then use a significant portion of these deposits to extend loans to those who need money. In this way, banks mediate between those who have surplus money (the depositors) and those who need money (the borrowers). Banks maintain their share of profit by charging a higher interest rate on the loans they lend out than the interest they add to the depositors’ amounts.

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