When a bank grants a loan to a customer who gets the funds and keeps it at home for a while, then the money supply will:
A) Not change because demand deposits did not go up
B) Not change because the money was not spent
C) Increase
D) Decrease

Question

Quizplus · Accepted Answer

When a bank grants a loan, it creates new money in the form of demand deposits, increasing the money supply regardless of whether the funds are spent immediately or held at home.

When a Bank Grants a Loan to a Customer Who