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What is Understanding Credit Creation Process about?

This document illustrates how fractional reserve banking creates credit in the economy. It shows that when a person deposits money in the bank, the bank is only required to keep a portion of those deposits in reserves. The bank can then lend out the remaining funds, which are deposited in another account. This process repeats, allowing the initial deposit to be multiplied across several accounts. With a 25% reserve requirement and $200 initial deposit, the maximum amount of deposits created is $800. Through

Author

Anjali Shah

Language

EN