Final answer:
Banks can't give all customers their cash simultaneously because they operate on a fractional reserve system where most of the deposited money is used to issue loans. This process allows banks to earn profit through interest on these loans. Transactions are facilitated through various withdrawal methods, without the need for huge cash reserves.
Step-by-step explanation:
A bank wouldn’t be able to give every single customer all of their money deposited with the bank at the same time primarily because banks invest the money, and not all of it is kept in cash. Banks operate on a system known as fractional reserve banking, where only a fraction of bank deposits are kept on hand and available for immediate withdrawal. This system allows banks to issue loans to other customers; when these customers pay back the loans with interest, the bank makes profit.
This process is crucial for the bank’s business model, because the more money that is stored in the bank’s vault, the less is available for lending and the less profit the bank stands to make. Banks are essential for making it easier for a complex economy to carry out transactions. They allow people and businesses to store money in checking or savings accounts and then withdraw this money as needed through various means like direct withdrawal, checks, or debit cards.