Why Do Banks Create Money? Do They Create Money to Help

question 82

Essay

Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?

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Definitions:

Outstanding Checks

Checks that have been written and recorded in the payer's financial records but not yet cleared or cashed by the recipient.

Cash Flow

The net amount of cash and cash-equivalents being transferred into and out of a business.

Monthly Cash Expenses

The total amount of cash payments made by a business within a month to cover its operational expenses and obligations.

Cash On Hand

The total amount of cash or cash equivalents that a business or individual has accessible immediately.