When a commercial bank makes loans, it creates money; when loans are repaid, money is destroyed. Explain.

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Economics

ISBN: 978-0073375694

18th edition

Authors: Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn

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Question Posted: May 23, 2013 07:55 AM

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A commercial bank creates money when it does all the following except ______. A. Decreases its excess reserves B. Makes loans C. Creates deposits D. Puts cash in its ATMs
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When a commercial bank makes loans, it creates money; when loans are repaid, money is destroyed. Explain.

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