Ans – (c)
Commercial Banks create money by way of demand deposits.
Generally, commercial banks create money through lending that is credited in the demand deposits.
The commercial bank provides loans to the public from initial deposits.
Banks do not lend this money by giving the amount in cash. Rather, they open the accounts in the names of borrowers, who are free to withdraw the amount whenever they like.
This demand deposits act as money as borrowers can use it to settle their liabilities and purchases.
The money spent by the borrowers comes back into the banks in the form of deposit accounts of those who have received this payment.
It will increase the demand deposits of banks.`
With this increased cash reserves, commercial banks offer loans to others and create more demand deposits.
Thus, Commercial banks create money by way of demand deposits.