How do banks help increase the money supply?
A)They send more money to the Bank of Canada.
B)They hold more money in their accounts with the Bank of Canada.
C)They print more money.
D)They extend loans to credit-worthy consumers.

Question

Quizplus · Accepted Answer

Banks help increase the money supply by extending loans to credit-worthy consumers. This increases the amount of money in circulation and expands the money supply. As consumers deposit their loan proceeds into their bank accounts, this creates additional funds for the bank to lend out, thereby further increasing the money supply.

How Do Banks Help Increase the Money Supply