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    How Banks Generate Profit

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    Explain in detail how banks operate. Include a description of how banks generate profit.

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    Solution Preview

    Banks take deposits from customers, which are a liability to the bank because customers can withdraw their money at any time, and the bank must be able to give the money to the customer upon request. From customer deposits, banks must retain a portion (mandated by the Federal Reserve) as reserves. The purpose of reserves is to handle ...

    Solution Summary

    The process in which banks generate profits is clearly summarized.