Banking Awareness - Basics Of Banking & Banking Terminology
Which banking activity directly leads to the creation of credit?
Which banking activity directly leads to the creation of credit?
easy Q2 of 15
Step-by-Step Solution
Step 1: Identify credit expansion action
Credit is created when banks lend money.Step 2: Apply fractional reserve concept
Banks lend a part of deposits while keeping reserves.Final Answer:
Lending a portion of deposits → Option BQuick Check:
Partial lending expands total credit ✅
Quick Trick: Partial lending = credit creation.
Common Mistakes:
- Confusing credit creation with cash holding.
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