Economics - Money and Banking - Banking system and credit creation - How Banks Create Money

A 5-step explanation. Step 1: 'Fractional Reserve Banking' - Banks only keep a fraction of deposits as reserves (e.g., 10%). The rest is lent out. Step 2: 'The Process' - Deposit $1000 → Bank keeps $100, lends $900 → $900 deposited elsewhere → That bank keeps $90, lends $810 → And so on... Step 3: '