This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Why do banks create money? Do they create money to help the Federal Reserve control the money supply ... (Read 161 times)

nmorano1

  • Hero Member
  • *****
  • Posts: 598
on: Jun 29, 2018
Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?
 
  What will be an ideal response?

Question 2

Real interest rates at times have been negative. Why would anyone lending money agree to a negative real interest rate?
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

stallen

  • Sr. Member
  • ****
  • Posts: 336
Reply #1 on: Jun 29, 2018
Answer to Question 1

Banks create money to make a profit. Banks create money when they make loans. The loans take the form of checking account deposits. Asking why banks create money is the same as asking why they make loans.

Answer to Question 2

The lender did not agree to a negative real interest rate, instead unanticipated inflation occurred. If the actual inflation rate exceeds the anticipated inflation rate, the actual real interest rate received by lenders and paid by borrowers can end up negative.


nmorano1

  • Member
  • Posts: 598
Reply 2 on: Jun 29, 2018
Thanks for the timely response, appreciate it

JaynaD87

  • Member
  • Posts: 368
Reply 3 on: Yesterday
Great answer, keep it coming :)

« previous next »
 

Did you know?

The first documented use of surgical anesthesia in the United States was in Connecticut in 1844.

Did you know?

More than 50% of American adults have oral herpes, which is commonly known as "cold sores" or "fever blisters." The herpes virus can be active on the skin surface without showing any signs or causing any symptoms.

Did you know?

Fewer than 10% of babies are born on their exact due dates, 50% are born within 1 week of the due date, and 90% are born within 2 weeks of the date.

Did you know?

Immunoglobulin injections may give short-term protection against, or reduce severity of certain diseases. They help people who have an inherited problem making their own antibodies, or those who are having certain types of cancer treatments.

Did you know?

A good example of polar molecules can be understood when trying to make a cake. If water and oil are required, they will not mix together. If you put them into a measuring cup, the oil will rise to the top while the water remains on the bottom.

The Hepatic Portal Blood Supply The liver receives water, minerals, and nutrients from the digestive The Hepatic Portal Blood Supply The liver receives water, minerals, and nutrients from the digestive
Neural control of hormone release from the hypothalamus. Neural control of hormone release from the hypothalamus.
The carousel apparatus used to deprive an experimental rat of sleep while a yoked control rat is ... The carousel apparatus used to deprive an experimental rat of sleep while a yoked control rat is ...
Create a soapy lather with the hands and spread the soap up to the elbows. Liquid soap is preferred. ... Create a soapy lather with the hands and spread the soap up to the elbows. Liquid soap is preferred. ...
Percentage of Americans Living in Communities with a Fluoridated Water Supply, by State. 2012 Percentage of Americans Living in Communities with a Fluoridated Water Supply, by State. 2012
Comparison of Control by the Nervous and Endocrine Systems Comparison of Control by the Nervous and Endocrine Systems
Video: Darwin's Observation (Fossils, Galapagos Islands & Africa ) and Natural Selection (Adaptive Traits)

For a complete list of videos, visit our video library