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Commercial banks

Definition

Commercial banks are financial institutions that accept deposits from individuals and businesses, and provide loans and other financial services. They play a crucial role in the economy by facilitating money circulation.

Related terms

Fractional Reserve Banking: This term refers to the practice where commercial banks keep only a fraction of their deposits as reserves and lend out the rest.

Bank Reserves: These are funds held by commercial banks either as cash or on deposit with central banks to meet withdrawal demands and maintain stability.

Money Multiplier: The money multiplier is a measure of how much new money can be created by commercial banks through lending based on their reserve ratios.

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Practice Questions (1)

  • What is the primary way that commercial banks create money?

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About Us

About Fiveable

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Terms of Use

Privacy Policy

CCPA Privacy Policy

Resources

Cram Mode

AP Score Calculators

Study Guides

Practice Quizzes

Glossary

Cram Events

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Crisis Text Line

Help Center

© 2024 Fiveable Inc. All rights reserved.

AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.