Assertion (A): Commercial banks create money.
Reason (R): Every loan a bank makes is spent and comes back to banks as a new demand deposit, which is money.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Demand deposits are part of the money supply.
Lending creates new deposits, so it adds to money. R explains A.

Concept: Banks create money
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsDeposit creation, round by round

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Assertion (A): Commercial banks create money.Reason (R): Every loan a bank makes is spent and comes back to banks as a new demand deposit, which is money.

Explanation

Assertion (A): Commercial banks create money.
Reason (R): Every loan a bank makes is spent and comes back to banks as a new demand deposit, which is money.