Banks can increase the money supply by:
A)offering financial services, such as money market accounts.
B)printing additional currency notes.
C)paying interest to their depositors.
D)making loans that result in additional deposits.

Question

Quizplus · Accepted Answer

Banks can increase the money supply by making loans that result in additional deposits. When a bank makes a loan, it creates a new deposit for the borrower, which in turn increases the money supply. This is known as the multiplier effect, where a single loan can result in multiple new deposits being created in the banking system. The other options listed do not directly increase the money supply.

Banks Can Increase the Money Supply By