The Reason Why the Banking System Can Increase Checkable Deposits

question 91

Multiple Choice

The reason why the banking system can increase checkable deposits by a multiple of initial deposits is that:

• A)the banking system must keep reserves equal to 100 percent of its checkable deposits.
• B)the central bank follows policies that prevent reserves from falling below the level required by law.
• C)reserves lost by any particular bank are gained by the Federal Reserve Bank.
• D)borrowers often spend most of a loan which is then deposited.

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Definitions:

Increase

A rise or growth in quantity, size, intensity, or another measure, often indicating a positive trend in context.

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The practices and rituals associated with the end of life and the disposal of a body, varying significantly across cultures and religions.

Visited at Home

The act of someone coming to one’s place of residence for social, business, or professional purposes.