Question

When describing the banking system, which of these would be a false statement about it?

Group of answer choices

a) Banks lend to investors by borrowing funds from households.

b) When it comes to the flow of capital between households and investors, banks are the crucial link.

c) Competition between the central bank and private banks causes interest rates to be limited.

Answer 1

When household deposit the money in the bank and bank give some interest to the depositor and those money is lend by bank to the investor and take interest charge which would be more than the interest paid by bank to the depositor.

So banks are the crucial link between households and investors.

So option A and option B are correct.

Option c is incorrect because there are no competition between the central bank and private bank causes interest rate to be limited

Central bank just provide guidelines and interest rate increases or decreases according to the market situation and monetary policy.

So option C is false statement.