We discussed in the previous section how to generate money, and an
illustrative example to explain, and in this section we will discuss the
importance of the process of generating cash, based on the process of
generating money and credit industry by commercial banks to the so-called law
of large numbers, and unique commercial banks from other financial institutions
ability superior in the industry credit, that is, they are unique to supply the
economy kind of money represents a second form of payment methods that can be
entered in into the cash balance in the economy, which are used for the
completion of various transactions to society and increase the ability of
commercial banks to generate credit based on the legal reserve ratio determined
by the monetary authorities state, when increasing the reserve ratio shrinks
the ability in the credit industry, and vice versa, if the monetary authorities
lowered the legal reserve, it allows banks to increase their lending rates
which have an abundance of money they can lend.
Why is the process of generating the money or the credit industry is
very important for the economy
Because of which will provide the economy with two types of coins to
complete various transactions, the first type is the money the legal unique issuing
central bank (notes and coins), and the second type are cash derivative arising
from the process of generating the money or the credit industry that are unique
to the commercial banks.
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