alleryIn the goldsmith (Lala) story, money created 'out of thin air' illustrates:
Acounterfeiting of currency notes
Bcredit creation by banks lending out deposits
Ca simple barter exchange
Daccumulation of foreign exchange reserves
Answer & Solution
Correct answer: B. credit creation by banks lending out deposits
Lala lends out gold he holds for others, creating extra paper-receipt 'money' — exactly how banks create credit from deposits.
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