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:

ASPE

The Accounting Standards for Private Enterprises (ASPE) is a set of accounting standards for private companies in Canada, providing guidelines on financial reporting practices.

Accrual Basis

An accounting method where revenues are recorded when earned, and expenses are recorded when incurred, regardless of when cash is exchanged.

Net Income

The net income of a business once all costs and taxes are subtracted from its total earnings.

Cash Basis

The cash basis is an accounting method where revenues and expenses are recognized only when cash is received or paid, as opposed to when they are incurred.