The correct answer is **a. Lending out part of their deposits**.

Banks create money primarily through a process called fractional reserve banking. When banks receive deposits, they are required to keep a fraction of those deposits in reserve (often mandated by regulation) while they can lend out the remainder. This lending process allows money to circulate in the economy, as the loaned money is spent and redeposited in banks, which can again lend out a portion of the new deposits. This process multiplies the total amount of money in circulation, creating what is known as "broad money."

In contrast, issuing debit cards and accepting checks do not directly create money; they simply facilitate the movement of existing money within the banking system.

Question

The correct answer is **a. Lending out part of their deposits**.

Banks create money primarily through a process called fractional reserve banking. When banks receive deposits, they are required to keep a fraction of those deposits in reserve (often mandated by regulation) while they can lend out the remainder. This lending process allows money to circulate in the economy, as the loaned money is spent and redeposited in banks, which can again lend out a portion of the new deposits. This process multiplies the total amount of money in circulation, creating what is known as "broad money."

In contrast, issuing debit cards and accepting checks do not directly create money; they simply facilitate the movement of existing money within the banking system.

Knowee AI · Accepted Answer

The correct answer is **a. Lending out part of their deposits**.

Banks create money primarily through a process called fractional reserve banking. When banks receive deposits, they are required to keep a fraction of those deposits in reserve (often mandated by regulation) while they can lend out the remainder. This lending process allows money to circulate in the economy, as the loaned money is spent and redeposited in banks, which can again lend out a portion of the new deposits. This process multiplies the total amount of money in circulation, creating what is known as "broad money."

In contrast, issuing debit cards and accepting checks do not directly create money; they simply facilitate the movement of existing money within the banking system.

Banks create money by aLending out part of their deposits bIssuing debit cards cAccepting checks

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Banks create money by:

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