2007-03-18 09:37:28 · 3 answers · asked by styles4u 4 in Social Science ➔ Economics
They have a money multiplier effect. Banks create a large portion of the money supply through deposits and lending. The control of the money system is a reserve system so we can have an influence over the size of money. Otherwise, the banks would create and destroy money supply in a way multiplying the economic trend of the times.
2007-03-18 10:00:37 · answer #1 · answered by JuanB 7 · 0⤊ 1⤋
Study ths history of recession and depression in western capitalist economies. The answer is obvious. Visit the links below.
2007-03-18 16:46:28 · answer #2 · answered by opinionator 5 · 0⤊ 0⤋
Because if the economy tanks, the banks will not have any cash and they will go bankrupt.
They also will lend like crazy if they have no reseerve requirement.
2007-03-18 16:40:29 · answer #3 · answered by Santa Barbara 7 · 0⤊ 0⤋