Money is "created" when:
A) A depositor deposits money at the bank
B) A bank grants a loan to a customer
C) Someone lends money to a friend or a family member
D) People use money to pay for stuff they buy from one another

Question

Quizplus · Accepted Answer

Money is created when a bank grants a loan to a customer. This is because the bank credits the borrower's account with new money, which they can then spend or withdraw. This process is known as "fractional reserve banking," where banks can create new money by lending out a portion of the deposits they have received. A depositor depositing money at a bank (A) does not create new money, it only transfers existing money from one account to another. Lending money to friends or family (C) also does not create new money, it only transfers existing money from one person to another. Using money to pay for stuff (D) also does not create new money, it only facilitates the exchange of existing money for goods or services.

Money Is "Created" When