Banks create money by
A)printing money up to their required reserve limit.
B)printing dollar bills.
C)buying government securities with cash.
D)making loans and creating deposits.
E)creating securities.

Question

Quizplus · Accepted Answer

Banks create money by making loans and creating deposits. When a bank issues a loan, it credits the borrower's account with new deposits, effectively creating new money out of nothing. This is possible because banks are only required to keep a fraction of their deposits on hand as reserves, so they can lend out the rest. This process is known as fractional reserve banking.

Banks Create Money by