The majority of money is created when
A) banks make loans.
B) new coins are minted.
C) the federal government borrows from the public.
D) the Fed sells bonds.

Question

Quizplus · Accepted Answer

The majority of money in modern economies is created through the process of banks making loans. When banks provide loans to their customers, they create new bank deposits in the process, which increases the money supply. This form of money creation is significantly larger in volume compared to the minting of new coins or the federal government borrowing, which do not directly increase the money supply in the same way.

The Majority of Money Is Created When