Banks create money by ?
Correct answer: D. lending out part of their deposits
- A. printing it
- B. issuing debit cards
- C. accepting cheques
- D. lending out part of their deposits
Explanation
Commercial banks create deposit money when they lend part of their deposits, because the loan is credited to a borrower's account and becomes a new spendable deposit. Printing currency is the central bank's function, not ordinary bank money creation.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
Practise Macroeconomics
1,499 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Macroeconomics questions
If banks and the private sector decide to hold less cash the money multiplier will be ?
When interest rate rise, other things equal, we can expect the quantity of real money holding to ?
M4 is a __________ measure of money and includes deposits at both __________ and _________?
Each point on the LM curve represents the equilibrium point in the ?
The curve that illustrates the positive relationship between the equilibrium values of aggregate output and the interest rate in the money market is the ?
Each point on the IS curve represents the equilibrium point in the ?