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 259 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
Great answer, keep it coming :)

kjohnson

  • Member
  • Posts: 330
Reply 3 on: Yesterday
Gracias!

« previous next »
 

Did you know?

The Romans did not use numerals to indicate fractions but instead used words to indicate parts of a whole.

Did you know?

More than 34,000 trademarked medication names and more than 10,000 generic medication names are in use in the United States.

Did you know?

People with alcoholism are at a much greater risk of malnutrition than are other people and usually exhibit low levels of most vitamins (especially folic acid). This is because alcohol often takes the place of 50% of their daily intake of calories, with little nutritional value contained in it.

Did you know?

Your chance of developing a kidney stone is 1 in 10. In recent years, approximately 3.7 million people in the United States were diagnosed with a kidney disease.

Did you know?

Human stomach acid is strong enough to dissolve small pieces of metal such as razor blades or staples.

Successful biological control of leafy spurge. Successful biological control of leafy spurge.
EGT 1 and EGT 2 are used by the PCM to help control after treatment. EGT 1 and EGT 2 are used by the PCM to help control after treatment.
A typical evaporative emission control system. Note that when the computer turns on the canister ... A typical evaporative emission control system. Note that when the computer turns on the canister ...
Separate the metatarsals. Create space between the metatarsals by holding onto the sides of the foot ... Separate the metatarsals. Create space between the metatarsals by holding onto the sides of the foot ...
Differential metabolic profile from livers of control mice and livers from mice 2 h after treatment ... Differential metabolic profile from livers of control mice and livers from mice 2 h after treatment ...
Guidelines for Field Triage of Injured Patients, Centers for Disease Control, 2011 Guidelines for Field Triage of Injured Patients, Centers for Disease Control, 2011
Video: Photosynthesis and Van Helmont Experiment

For a complete list of videos, visit our video library