Money Creation

Money Creation is the process in which banks increase the number of funds in checkable deposits by employing reserves to help make loans. Money creation is made possible through fractional-reserve bank. Because banks keep only a fraction of build up as reserves, extra reserves can be used to back up in addition to create additional checkable deposits that didn’t previously exist. Government policy makers depend upon the money development process when doing monetary policy. Money creation by banks can be a modern alternative to be able to printing paper currency.