Money is "created" when
A) a depositor gets cash from the bank's ATM.
B) a bank accepts deposits from its customers.
C) people receive loans from their banks.
D) people spend the incomes that they receive.

Question

Quizplus · Accepted Answer

Money is created when people receive loans from their banks. When a bank lends money, they are creating new money that didn't exist before. This is because the borrower now has access to the loan amount and can spend it, while the bank still has the borrower's promise to repay the loan. This process is known as fractional reserve banking, which allows banks to create new money through lending.

Money Is "Created" When