Banks create money by
A)printing currency.
B)asking the Fed to print more currency.
C)lending to the Fed.
D)making loans.
E)buying government securities.

Question

Quizplus · Accepted Answer

Banks create money by making loans. When banks make loans, they create new deposits for the borrower, effectively creating new money in the economy. The other choices are not accurate: banks do not print currency themselves (choice A), they cannot ask the Fed to print more currency (choice B), they do not lend to the Fed (choice C), and buying government securities does not directly create new money (choice E).

Banks Create Money by