Which of the Following Best Describes How Banks Create Money

question 33

Multiple Choice

Which of the following best describes how banks create money?

• A)Banks charge higher interest rates on loans than they pay on deposits.
• B)Banks charge fees for providing financial advice.
• C)Banks create checking account deposits when making loans from excess reserves.
• D)Banks make loans from reserves.

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Definitions:

Operating Cash Flow

An assessment of the cash income resulting from a company's standard operational processes.

Millions

A numerical term representing one thousand thousands, or 1,000,000.

Common Stock

A type of equity security that represents ownership in a corporation, with rights to vote on corporate matters and receive dividends.

Net Income

The conclusive financial profit of a company after subtracting expenses and tax payments from its revenue stream.