Note: This is post #88 in a weekly video series on basic economics.

Borrowing and saving plays an essential role in our economy, and banks often serve as their primary link. But how exactly do banks operate?

In this video by Marginal Revolution University, Alex Tabarrok explains how banks serve as financial intermediaries, how they turn savings into loans, and how they make loans as productive as possible.

(If you find the pace of the videos too slow, I’d mend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)

Clickhereto see other videos in the Introduction to Economics series.