When a Bank Takes Savings from Many Small Savers and Lends

question 23

Multiple Choice

When a bank takes savings from many small savers and lends it to many borrowers, the bank:

• A) decreases the risk to savers through diversification.
• B) increases the risk to borrowers through high transaction costs.
• C) decreases the risk to savers through economies of scale.
• D) decreases the return to savers and increases the cost to borrowers.

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Definitions:

Stress

A psychological and physical response to internal or external demands or stressors, characterized by feelings of tension, challenge, or strain.

Life Or Death

A situation or condition that is critically vital, often implying a risk of mortality.

Confrontation

A direct engagement or encounter between conflicting parties, often with the aim of addressing and resolving a dispute.

Compromise

A process of making concessions to settle differences, where each party gives up something to reach a mutually acceptable solution.