When a commercial bank creates credit its immediate effect is that it raises__________________?
Correct answer: C. The money supplies
- A. The exchange rates
- B. The interest rates
- C. The money supplies
- D. The real national income
Explanation
When banks create credit, they create new deposit money, so the immediate effect is an increase in the money supply. Any rise in real national income is a possible later consequence, not the direct accounting effect.
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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.
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