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Describe how banks create money. If the Bank of Canada wanted to use all three of...

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Economics

Describe how banks create money. If the Bank of Canada wantedto use all three of its policy tools to decrease the money supply,what would it do?

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3.6 Ratings (316 Votes)
Banks create money through the a multiplier process This happens through a dynamic chain where the bank lend the excess reserves keeping aside from the deposits it receives In the next round this loan is deposited by the borrowers in the bank Here again bank sets aside a portion of this    See Answer
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