Money creation and money demand Flashcards
1
Q
What is money creation?
A
Money creation is the process by which money is produced/issued
(it leads to an increase in the money supply)
2
Q
What are the ways of creating money?
A
- issue currency (physically manufacturing money)
- scriptural money creation
3
Q
What is a fractional-reserve banking system?
A
It is a financial system in which some fraction of the deposits can be used to grant loans
4
Q
How can bank reserves be divided?
A
There are 2 types of reserves:
- Required reserves
- Excess reserves
5
Q
What is the money multiplier?
A
It is an instrument to measure the total amount of money created by the banking system.
