Components of money supply.

Do you agree or disagree with the following statement?

"Most of the money supply of the United states is created by banks making loans."

1.Agree. Illustrate when a bank's reserves increase, they make more loans, which creates more checking deposits and increases the money apply.

2.Disagree. Bank loans have no impact on the supply of money. Money supply increases if the U.S. Treasury prints more money.

3.Agree. In order for a bank to make loan, it must print additional currency specifically for that purpose. This, in turn, increases the money supply.

4.Disagree. Bank loans involve only electronic transfers of funds and do not involve the money supply.