How does the private banking system create money (use M1 as the definition of mo

Question

How does the private banking system create money (use M1 as the definition of money supply)? (Private banks are the ones like you, your family, and your friends do their banking at.) O Printing and distributing paper money. O Lending a fraction of their deposits. O Buying government bonds. O Minting coins O The private banking system cannot create money. 3.33 Question 5 If the required reserve ratio is 10% (rrr-0.10), then the Simple Deposit Multiplier is O none of the other options. 10. O 1.1 o 9. O 0.9.

Explanation / Answer

(1st Question) Option (2)

Under fractional banking system, banks lend a fraction of their total reserves as credit, which increases total money supply in the economy.

(Question 5) Option (2)

Deposit multiplier = 1 / rr = 1 / 0.1 = 10

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.