Principles of Macroeconomics / Unit 11 MAC 1014 short lesson, about 20 seconds
Lending Creates Money
Captions available
The idea
When a bank makes a loan it credits the borrower's account. That balance is a checkable deposit, and deposits are money. So lending creates money, and repayment destroys it.
In practice
Nothing was printed; a number was written and the money supply rose.
Where people slip
No single bank keeps what it creates, because the borrower spends it elsewhere.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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