What is the immediate effect when Bank A lends $1, 000 to a local business?

Question

Quizplus · Accepted Answer

When Bank A lends $1,000 to a local business, the money supply increases by $1,000. This is because the local business now has an additional $1,000 in funds, which it can use to spend and invest in the economy. The money supply is defined as the total amount of money in circulation in an economy, including physical currency, checking accounts, and other forms of liquid assets. When more money is added to the money supply, it can have a stimulative effect on the economy by increasing consumer spending and business investment.

What Is the Immediate Effect When Bank a Lends $1