Describe how banks help to eliminate money.
What kind of money are you talking about? Taking paper money out of circulation?
Banks actually create money when they issue checking accounts for people and busineses they grant loans to. They also put a lot of paper money into circulation with ATMs.
You might say that the issuance of credit cards by banks has made most developed countries able to function with less cash in circulation.
Decribe how banks eliminate money?
The bank is storing money therefore eliminating it off of the street and circulation.
To understand how banks help eliminate money, we need to distinguish between physical money (such as paper bills and coins) and digital money (such as electronic transactions and bank account balances). Banks play a role in both forms of money.
1. Physical Money: Banks do not directly eliminate physical money from circulation. Instead, they distribute and facilitate the storage of physical money. This is done through various means such as ATMs, where people can withdraw cash, and bank branches, where individuals and businesses can deposit cash. While banks handle the movement of physical money, they do not actively eliminate it.
2. Digital Money: Banks play a significant role in the creation and management of digital or electronic money. When banks issue loans or provide credit to individuals or businesses, they create digital money. This occurs when a bank grants a loan by adding funds to the borrower's bank account. These digital funds can be used for transactions, payments, and other financial activities. In this way, banks help eliminate the need for physical money for certain transactions.
Furthermore, the widespread use of credit and debit cards issued by banks has resulted in a decrease in the reliance on physical money. These cards allow individuals to make purchases electronically, reducing the need for cash transactions. This decrease in the use of physical money has contributed to the effectiveness and efficiency of the overall banking system.
In conclusion, while banks do not directly eliminate physical money from circulation, they facilitate the distribution and storage of physical money. Moreover, banks create and manage digital money through loans and credit, reducing the reliance on physical cash for transactions.