Which of the Following Statements BEST Explains How Financial Institutions

question 98

Multiple Choice

Which of the following statements BEST explains how financial institutions create money?

• A) By opening new checking accounts and giving more people access to readily available cash, financial institutions expand the money supply.
• B) By issuing money through government contracts, financial institutions expand the money supply.
• C) By taking deposits and loaning out these funds, financial institutions expand the money supply.
• D) By paying interest on its accounts and investments, financial institutions expand the money supply.
• E) By giving interest from its accounts to its clients, financial institutions expand the money supply.

---

Definitions:

Book Value

The net value of a company's assets minus its liabilities, essentially representing the total value if it were liquidated according to the balance sheet.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, represented by the equity stockholders have from share investments and retained earnings.

Stock Traded

Shares of a company that are bought and sold on a stock exchange platform.

Shares

Shares represent the portion of ownership in a company or an investment that entitles the holder to a proportional claim on profits, which may be paid out as dividends if declared.