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:

Dividend Policy

A company's strategy or guidelines for making dividend payments to its shareholders.

Share Value

The price at which a particular share of stock is traded on the market, determined by supply and demand.

Ex-dividend Date

The date on which a stock trades without its dividend, meaning that the seller is entitled to the dividend, not the buyer.

Regular Cash Dividend

A payment made by a company to its shareholders, usually in the form of cash, out of its profits or reserves on a regular basis, such as quarterly or annually.