Which example best describes how a bank injects money into the economy?

• A. A bank charges fees for account maintenance.
• B. A bank restricts withdrawals during a financial crisis.
• C. A bank provides loans to businesses for expansion projects.
• D. A bank increases interest rates on savings accounts.

Answer: (C)

Verified step by step guidance

1. Understand the concept of money injection: When a bank injects money into the economy, it means the bank is increasing the amount of money circulating in the economy, typically by lending or creating credit.
2. Analyze each option to see if it increases the money supply or circulation: Charging fees for account maintenance transfers money from customers to the bank but does not increase overall money supply.
3. Restricting withdrawals during a financial crisis limits money flow and does not inject money into the economy; it actually restricts liquidity.
4. Providing loans to businesses for expansion projects means the bank is lending money, which increases the money supply because businesses receive funds to spend and invest, thus injecting money into the economy.
5. Increasing interest rates on savings accounts encourages saving rather than spending, which tends to reduce money circulation rather than inject money into the economy.