Question

A Goldsmith could hold some gold in reserve for depositors’ withdrawals, but ________________ excess gold and thereby make a profit from depositors’ funds..

Answer 1

Answer: Loan out

Explanation:

Goldsmith is one of the many traditional form of medium of exchange used in the past. Whereby you placed your gold to a goldsmith and in return receive a receipt to use that as a medium of cash exchange.

If goldsmith could loan out excess gold they can make a profit from depositors fund. Because that excess gold gives them an opportunity to loan it out.