The majority of money is created when
A) banks make loans
B) new coins are minted
C) the Fed sells bonds
D) the federal government borrows from the public

Question

Quizplus · Accepted Answer

The majority of money in the economy is created when commercial banks make loans. When a bank issues a loan, they create new deposits in the borrower’s account, which can then be spent in the economy. This increase in the money supply is known as the money multiplier effect.

The Majority of Money Is Created When