Deposit creation occurs when

Question

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Deposit creation occurs when a bank lends money, as this leads to an increase in the amount of deposits held by the borrower, which in turn increases the amount of money circulating in the economy. The other choices do not directly lead to deposit creation. B may result in a transfer of deposits, but not the creation of new deposits. C involves borrowing from the central bank, which does not directly impact deposit levels. D involves taking money out of the banking system, which decreases deposit levels.

Deposit Creation Occurs When