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Munchkin
19 March, 18:18
How do banks create money?
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Aimee
19 March, 18:23
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The correct answer is: "They channel money from savers and issue loans".
The money creation process that takes place in the banking system works in the following way.
Economic agents deposit their savings in a bank, in exchange for a retribution (interest rate). Banks, by law, have to keep in cash a certain percentage of the money deposited, this is called the reserve ratio. But the rest of the money is used to issue loans to economic agents that need funding, in exchange for an interest rate that this time is earned by the bank and paid by the borrowers.
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Edith Terrell
19 March, 21:30
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They make the money with bank deposits
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