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Economics glossary · Policy and the financial sector

Lending

What lending means in economics, as one of functions of the financial sector, with an example and a question to test yourself.

Definition
Lending
Banks pool deposits and lend them to households and firms, choosing borrowers with good prospects of repaying, so savings are channelled into spending and investment.
Example

Can you think of an example of lending?

Test yourself

Can you name the five functions of the financial sector?

Learn it properly: the module

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