How Is It That the Banking System Is Able to Lend

question 121

Multiple Choice

How is it that the banking system is able to lend by a multiple of its excess reserves?

• A) Banks only have to hold a fraction of their deposits as reserves and can lend the rest to borrowers.
• B) Banks are required to hold only enough cash to meet the withdrawal needs of depositors.
• C) Loans can be made to borrowers.
• D) Required reserves have to be vault cash.
• E) Banks must hold their required reserves at the Federal Reserve.

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Definitions:

Fluid Balance

The maintenance of the proper amount of fluid in each compartment of the human body, which is crucial for ensuring bodily functions and overall health.

Infusion

The introduction of a fluid, such as medication or nutrients, directly into the bloodstream or body tissue over a period of time.

Infiltrated

Refers to the act of surreptitiously entering or spreading within an organization, system, or area with the intent of exerting influence or gathering information.

Deficient Fluid Volume

A medical condition characterized by a decrease in intravascular, interstitial, and/or intracellular fluid. This condition indicates dehydration.