A bank can create money by
A)selling some of its securities.
B)increasing its reserves.
C)lending its excess reserves.
D)printing more cheques.
E)converting reserves into securities.

Question

Quizplus · Accepted Answer

When a bank lends its excess reserves, it is creating new money. This is known as the money creation process in the banking system. The lending of excess reserves increases the money supply in the economy. The other options are not related to money creation by a bank.

A Bank Can Create Money by