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Fill in the Blank with Appropriate Alternatives Given Below Every Loan Creates a __________. - Economics

Fill in the Blanks

Fill in the blank with appropriate alternatives given below

Every loan creates a __________.


  • credit

  • deposit

  • profit

  • loss

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Every loan creates a credit.

Loans are given out of deposits at a higher interest rate than what is offered on those deposits. The money spent by the borrowers again come back to the bank in the form of deposits (if it is assumed that all transactions are routed through banks). The banks again keep a portion of the deposits with them and lent the rest and so on. In this way loans by commercial banks create credit.

Concept: Commercial Banks
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Micheal Vaz Economics HSC 12th Standard Maharashtra State Board
Chapter 12 Commercial Banking
Exercise | Q 1.3 | Page 110
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