Goldsmiths became bankers when they created money. How did they create money?

Question

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Goldsmiths created money by making loans in the form of receipts. This meant that they would issue receipts to borrowers in exchange for a promise to repay the loan with interest. These receipts could then be used as currency and traded among individuals, effectively creating new money in the economy. This practice laid the foundation for modern banking and the creation of paper money. A) is incorrect because goldsmiths did not have the authority to print their own receipts as currency. B) is incorrect because accepting more deposits of coins did not directly create new money. C) is incorrect because finding more gold and turning it into coins did not necessarily increase the total amount of money in circulation.

Goldsmiths Became Bankers When They Created Money