When a bank loans out $1000, what happens to the money supply?

Name: When a bank loans out $1000, what happens to the money supply?
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When a bank loans out $1000, it increases the money supply. This is because the borrower can now spend the $1000, which becomes income for the recipient. This recipient may then deposit the $1000 into their own bank account, which allows the bank to lend out more money, further increasing the supply of money. This process is known as the "money multiplier effect."

When a Bank Loans Out $1000, What Happens to the Money