Commercial bank money

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Money - money supply - commercial banks.

Commercial bank money means customers' deposits held in commercial banks.

(Commercial bank money is contrasted with central bank money: physical bank notes and coins; and reserves in financial institutions' current accounts with the central bank.)


Commercial bank money is created when commercial banks lend to their customers.

When the customers use those loans to buy goods and services, the businesses that receive payment for the goods and services often deposit the money back into commercial banks.

Thus increasing the total amount of money in circulation.


See also