What is the direct impact on the economy when a commercial bank issues new credit?

Multiple choice question for Basic of Economics. Select an option, then review the explanation below.

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An increase in currency exchange valuesA rise in borrowing costsAn expansion of the money supplyGrowth in the actual national income

Explanation

When a commercial bank extends credit, it effectively increases the amount of money circulating in the economy, thereby expanding the money supply. This is the immediate consequence, unlike changes in exchange rates, interest rates, or national income, which may occur indirectly or over time.

Practice related questions from the same subject.

1.Which of the following best describes deflation?
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4.Which political ideology is best summarized by the phrase, "From each according to his ability, to each according to his needs"?
5.Which type of currency experiences a decline in its exchange rate due to a continuous balance of payments deficit?

What is the direct impact on the economy when a commercial bank issues new credit?

Explanation

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