Review the process of money creation under both endogenous theory

Question

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Answer 1

Endogenous money theory states that money supply is determined by the demand from credit through commercial banks (Wells Fargo, Truist etc.) creating new deposits when they issue loans.

The process is:

1. Loan creation - When they approve a loan
2. Reserve management - When banks manage their reserve position to meet Federal requirements
3. Demand-driven - The amount of money created is driven by the demand for loans from households and businesses