2. How can banks afford to pay interest on their customers' savings account deposits (Points 1) They loan out the money in their customers' accounts and charge a higher interest rate on the?

Banks can afford to pay interest on savings account deposits because they use the funds deposited by customers to issue loans at higher interest rates. The difference between the interest earned from these loans and the interest paid to depositors, known as the interest rate spread, allows banks to cover operational costs and generate profit. Additionally, banks often maintain a fraction of deposits as reserves, ensuring they can meet withdrawal demands while still utilizing the majority of funds for lending.