The two basic sources of loanable funds are current the expansion of deposits by depository institutions and the generation of reserves through net capital inflows.

Question

Quizplus · Accepted Answer

The two basic sources of loanable funds are actually savings by households and businesses, and borrowing from foreign sources (i.e. net capital inflows). While depository institutions (such as banks) play a role in facilitating the flow of loanable funds, they are not a source themselves, as they do not create new money when they make loans.

The Two Basic Sources of Loanable Funds Are Current the Expansion