Which of the following best describes how banks create money? A. Banks create checking account deposits when making loans from excess reserves. B. Banks charge fees for providing financial advice. C. Banks make loans from reserves. D. Banks charge higher interest rates on loans than they pay on deposits.

Question

Grant Gill

Business

15 June, 18:16

Which of the following best describes how banks create money? A. Banks create checking account deposits when making loans from excess reserves. B. Banks charge fees for providing financial advice. C. Banks make loans from reserves. D. Banks charge higher interest rates on loans than they pay on deposits.

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Answers (1)

Know the Answer?

Spencer Castaneda · Answer 1

The answer would be C

Explanation:

Banks make loans from reserves, the banking system, when granting loans, multiplies the legal money received because it does not get out of it, but works through account entries.

Therefore, the money supply can be increased by increasing the proportion of deposits that banks use to make new loans, that is, by reducing the reserve ratio.