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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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.
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