Asked by Jesus Gonzalez Jauregui on May 16, 2024
Verified
Money is created when
A) Congress enacts legislation providing for increased bank reserves.
B) depository institutions make loans.
C) the Federal Reserve Board of Governors increases the discount rate.
D) Congress reduces taxes.
E) Congress increases spending.
Money Creation
The process by which the money supply of a country, or of an economic or monetary region, is increased.
Depository Institutions
Financial institutions that accept deposits from individuals and provide loans, such as banks and credit unions.
Loans
Sums of money borrowed that are expected to be paid back with interest by the borrower over a specified period of time.
- Familiarize yourself with the charge and gears the Federal Reserve utilizes for the supervision of monetary policy.
- Familiarize oneself with the effect that policies of the Federal Reserve have on inflation, interest rates, and the supply of money.
Verified Answer
WS
Wenesha StewartMay 19, 2024
Final Answer :
B
Explanation :
Money is commonly referred to as "credit money" because it is created through the process of banks making loans. When a bank makes a loan, it creates new money by crediting the borrower's account with the loan amount. This means that the money supply can expand or contract based on the amount of loans being made by banks.
Learning Objectives
- Familiarize yourself with the charge and gears the Federal Reserve utilizes for the supervision of monetary policy.
- Familiarize oneself with the effect that policies of the Federal Reserve have on inflation, interest rates, and the supply of money.