opens a savings account
at a local commercial bank
with a $200 deposit. The
bank
loans out the $200 with other funds from other savings accounts to
a local businessman
who is expanding his business. The local businessman pays back the loan over time with interest and the bank credits the savings account with interest. The individual withdraws money from the savings account to buy a new bike.
Part 2
In this example of the cycle of money, the benefit for the lender is:
the interest earned on the savings deposit can be used to buy a consumer good.
For the bank, the benefit is:
the difference between the interest paid by the businessman and the interest paid to the individual is profit for the bank.
For the businessman, the benefit is:
the ability to make enough money to pay back the loan.