Financial Institutions Quiz

If a commercial bank grants a loan or overdraft to a customer, what happens to the money supply?

Explain the role of the central bank as a lender of last resort.

Propose three ways in which the central bank can control the commercial banks.

How do commercial banks create credit or money?

Explain the role of the central bank as a banker to the government.

Design a commercial bank's strategy to attract more customers.

If the central bank increases the reserve requirement for commercial banks, what effect would this have on the money supply?

Explain the role of the central bank as an adviser to the government.

Propose a strategy for a commercial bank to effectively manage its liquidity and reserve requirements.

Which of the following is a characteristic of commercial banks?

• They are limited liability companies

• They are not profit-oriented

• They do not transact business with individuals

• Both b and c