Chapter P1, Problem 3RQ

To determine

The reasons why it is better to keep money in financial institution rather than holding a large amount of cash

Explanation of Solution

Due to the following reasons it is better to keep money in financial institution rather than holding it as a cash:

1. It is better to keep money in a financial institution such as bank because on deposits financial institution offer interest on savings or deposits but if someone keep it as a cash then it cannot provide any interest or earning.
2. And, if someone prefers to hold large amount of cash then there is a chance of stealing and it is not possible to get the stolen money back and someone would lose it forever. Therefore, in financial institution money is more protected.
3. Financial institutions provide internet or mobile banking through which a person can easily transact money without using cash and this cashless transaction is the safest and smartest option for the transaction as compared to cash transactions. Therefore, keeping money in financial institution provide peace of mind to consumers.

Economics Concept Introduction

Introduction: Bank is the financial institution that accept deposits of customers and lend the money to borrowers by charging service fees. Banks offer loans to an individual or business and also provide sales and trading services to business firms.