Question

Process of credit creation by commercial banks by

Answer 1

Explanation:

In a fractional reserve banking system, commercial banks are permitted to create money by allowing multiple claims to assets on deposit.

Banks create credit that did not previously exist when they make loans.

This is sometimes called the money multiplier effect.

Answer 2

Answer:

Commercial Banks and It's Limitations Commercial banks create credit by advancing loans and purchasing securities. They lend money to individuals and businesses out of deposits accepted from the public. However, commercial banks cannot use the entire amount of public deposits for lending purposes.