Chartered banks create money when they:
A)accept cash deposits from the public.
B)purchase government securities from the central banks.
C)create demand deposits in exchange for IOUs.
D)raise their interest rates.

Question

Quizplus · Accepted Answer

Chartered banks create money by creating demand deposits in exchange for IOUs. This is a process commonly known as fractional reserve banking, where banks only hold a fraction of total deposits as reserves and lend out the rest, effectively creating new money in the economy. Accepting cash deposits, purchasing government securities, or raising interest rates do not directly create new money in the economy.

Chartered Banks Create Money When They