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Credit creation by banks mainly results in which of the following?

easy Q13 of 15
Banking Awareness - Basics Of Banking & Banking Terminology
Credit creation by banks mainly results in which of the following?
AReduction in deposits
BDecrease in money supply
CExpansion of money supply
DElimination of cash usage
Step-by-Step Solution

  1. Step 1: Identify the outcome

    Credit creation increases the total amount of money in circulation.

  2. Step 2: Link lending and deposits

    Loans become deposits elsewhere, expanding money supply.

  3. Final Answer:

    Expansion of money supply → Option C

  4. Quick Check:

    Loans + redeposits = more money in system ✅
Quick Trick: More lending = more money supply.
Common Mistakes:
  • Assuming credit creation reduces deposits.
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