Which of the following statements BEST explains how financial institutions create money?
A) By opening new checking accounts and giving more people access to readily available cash, financial institutions expand the money supply.
B) By issuing money through government contracts, financial institutions expand the money supply.
C) By taking deposits and loaning out these funds, financial institutions expand the money supply.
D) By collecting interest on its accounts through investments, financial institutions expand the money supply.
E) By giving interest from its accounts to its clients, financial institutions expand the money supply.

Question

Quizplus · Accepted Answer

C)Further, the money supply expands because banks are allowed to loan out most (although not all)of the money they take in from deposits.

Which of the Following Statements BEST Explains How Financial Institutions