How Money Is Made: Understanding Bank Lending in the Economy

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

Which of the following is NOT true regarding the role of banks in the economy?

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1. How do banks make money?

2. When a deposit is made into a bank, what does the bank do?

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About This Quiz & Worksheet

These assessments test what you know about bank lending through testing your understanding of topics such as the role of banks in an economy and how they make money.

Quiz & Worksheet Goals

The goal of these questions is to ensure you know:

  • The role of banks in an economy
  • How banks make more money
  • What happens after a deposit is made
  • The result of loaning out excess reserves
  • How to calculate the increase in the money supply

Skills Practiced

  • Interpreting information - verify you can read information regarding what happens after a deposit is made and interpret it correctly
  • Reading comprehension - ensure that you draw the most important information from the related bank lending lesson
  • Problem solving - use acquired knowledge to solve an increase in money supply problem

Additional Learning

The lesson called How Money is Made: Understanding Bank Lending in the Economy is here to help you review the concepts covered in the quiz and expand your learning beyond that. Additional objectives this lesson will help you meet include:

  • Identify the purpose of banks in an economy
  • Describe how banks can serve as an intermediary between savers and borrowers
  • Understand what the fractional reserve banking system involves
  • Appreciate how new money is created from this process
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