When a person pays a loan back to a bank by writing a check for the amount due, both demand deposits and the money supply increase.

Name: When a person pays a loan back to a bank by writing a check for the amount due, both demand deposits and the money supply increase.
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Paying back a loan with a check transfers existing demand deposits from the borrower's account to the bank, reducing the borrower's account balance without increasing total demand deposits or the money supply.

When a Person Pays a Loan Back to a Bank