[amp_mcq option1=”Advancing loans” option2=”Purchasing securities” option3=”Both (a) and (b)” option4=”Neither (a) andof (b) ” correct=”option3″]<\/p>\n
The correct answer is (c). Banks create credit by advancing loans and purchasing securities.<\/p>\n
When a bank advances a loan, it creates new money by crediting the borrower’s account with the amount of the loan. The borrower can then use this money to make purchases or investments. When a bank purchases securities, it is essentially lending money to the issuer of the securities. The issuer of the securities then uses this money to finance its operations.<\/p>\n
Both of these activities create new money and contribute to the expansion of the money supply.<\/p>\n
(a) Advancing loans is a common way for banks to create credit. When a bank lends money to a borrower, it creates new money by crediting the borrower’s account with the amount of the loan. The borrower can then use this money to make purchases or investments.<\/p>\n
(b) Purchasing securities is another way for banks to create credit. When a bank purchases securities, it is essentially lending money to the issuer of the securities. The issuer of the securities then uses this money to finance its operations.<\/p>\n
(d) Neither (a) nor (b) is correct. Banks create credit by both advancing loans and purchasing securities.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”Advancing loans” option2=”Purchasing securities” option3=”Both (a) and (b)” option4=”Neither (a) andof (b) ” correct=”option3″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[42],"tags":[],"class_list":["post-4518","post","type-post","status-publish","format-standard","hentry","category-banking","no-featured-image-padding"],"yoast_head":"\n