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 242 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

mammy1697

  • Member
  • Posts: 341
Reply 3 on: Yesterday
Wow, this really help

« previous next »
 

Did you know?

ACTH levels are normally highest in the early morning (between 6 and 8 A.M.) and lowest in the evening (between 6 and 11 P.M.). Therefore, a doctor who suspects abnormal levels looks for low ACTH in the morning and high ACTH in the evening.

Did you know?

Multiple experimental evidences have confirmed that at the molecular level, cancer is caused by lesions in cellular DNA.

Did you know?

Computer programs are available that crosscheck a new drug's possible trade name with all other trade names currently available. These programs detect dangerous similarities between names and alert the manufacturer of the drug.

Did you know?

Sperm cells are so tiny that 400 to 500 million (400,000,000–500,000,000) of them fit onto 1 tsp.

Did you know?

HIV testing reach is still limited. An estimated 40% of people with HIV (more than 14 million) remain undiagnosed and do not know their infection status.

Japanese farmers create pentagon-shaped oranges Japanese farmers create pentagon-shaped oranges
The primary ignition system is used to trigger and therefore create the secondary (high-voltage) ... The primary ignition system is used to trigger and therefore create the secondary (high-voltage) ...
How to create a frequency table and histogram from raw data How to create a frequency table and histogram from raw data
Oil supply and prices affect the economies of nations Oil supply and prices affect the economies of nations
Hormonal control over male and female reproductive hormones Hormonal control over male and female reproductive hormones
Blood and Nerve Supply of Bone Blood and Nerve Supply of Bone
Video: Brain Anatomy Animation (Part 1 of 2)

For a complete list of videos, visit our video library