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Question Bank - Economics

Money: Credit creation

Q1. Banks can create money

(Select one answer)

(a) * only by illegally printing additional banknotes.
(b) * by paying interest to their depositors.
(c) * by making loans that result in additional deposits.
(d) * by offering financial services, such as money market accounts.

Source: Pearson logo

Q2. Goldsmiths could loan a part of the gold deposited in their vaults because

(Select one answer)

(a) * in those days people were less sophisticated in their financial transactions
(b) * not all depositors would claim their gold simultaneously
(c) * gold was much in demand
(d) * cheques had not yet been invented

Source: McGraw Hill logo

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