Finance, Forex and Investments

MacroEconomics: Commercial banks in the United States create money by?

Commercial banks in the United States create money by: A. Converting checking accounts to saving accounts B. Printing new currency C. Issuing loans D. Replacing worn-out currency E. Selling bonds

Public Comments

1. C - Issuing loans. Through the mechanics of fractional reserve banking, banks can lend out 10 times reserves, so if a bank has $1 million in deposits, it can lend out $10 million, which is an expansion in the money supply.