passwella.
Menu

JAMB Economics 1997 Question 35

Question 35

Financial Institutions

Banks can create more money by

  1. A.increasing its cash ratio with the Central Bank
  2. B.issuing more bank cheques
  3. C.accepting more deposits from customers
  4. D.lending out money from customers' deposits.
Show the answer and explanation

Answer: D (lending out money from customers' deposits.)

Explanation

When a bank lends out part of its deposits, the loans are spent and redeposited, creating new deposits many times the original amount.