Money is created by

Question

Money is created by

Quizplus · Accepted Answer

Money is primarily created by banks making loans. When a bank makes a loan, it creates new money by increasing the amount of money in the borrower's account. This new money then circulates in the economy, increasing the overall money supply. While banks do take in deposits, these deposits alone do not create new money - it is only when the bank uses the deposits to make loans that new money is created. Banks do pay for depositor's insurance, but this does not create money. Government taxation also does not create money, as taxes are a transfer of existing money from individuals to the government.

Money Is Created by