Your parents give you $200 in cash for receiving good grades

Economics Dec 03, 2020

Your parents give you $200 in cash for receiving good grades.

a. Briefly explain how the economy can benefit if you decide to deposit the money into the bank rather than keeping it as cash.

b What do banks do to incentivize individuals to deposit money instead of keeping it cash form?

Expert Solution

Answer-

a. If i will deposit the money in the bank it will benefit the economy as it will increase the deposits with the bank. It will ultimately increase the income of the bank.

b.
the incentives that bank offer to keep the money with them is that they provide an interest rate to the account holder on the basis of the amount deposited in the account by the account holder.

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