The basic sources of loanable funds are:
A) short-term funds and currency
B) current savings and the creation of new funds through the expansion of credit by depository institutions
C) contractual savings and commercial bank credit
D) bank loans and the creation of new funds through the contraction of credit by depository institutions

Question

Quizplus · Accepted Answer

The creation of new funds through the expansion of credit by depository institutions and current savings are the two basic sources of loanable funds. Short-term funds and currency may be used for loans, but they are not considered a primary source of loanable funds. Contractual savings and commercial bank credit are also sources of loanable funds, but they are not as fundamental as current savings and the expansion of credit by depository institutions. Bank loans and the contraction of credit by depository institutions are not sources of loanable funds, but rather the results of loanable funds being put to use.

The Basic Sources of Loanable Funds Are