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Government spending

‘A’ is an implementor of government policy.

1. Government instructs Central Bank to credit A with £X for desired spending
2. Central Bank credits A’s commercial bank with £X of *base money*
3. A’s commercial bank
- receives £X of base money into its own Central Bank Reserve Account (CBRA)
- credits A’s bank account with £X of *commercial bank money*
4. A’s bank account has £X more commercial bank money in it than before.

Outcome:
money supply has *increased* by £X