Question

How, in your opinion, has credit creation by the commercial banks accelerated the pace of economic growth? Write two observations.

Answer 1

Following observations may be noted in this regard:

Observation 1: Credit creation accelerates the process of growth by expanding the availability of credit for the purpose of investment.

Observation 2: Credit creation contributes to the process of growth by expanding the size of the market (aggregate demand), as the availability of credit for the purchase of consumer durables increases.