In a Fractional-Reserve Banking System, Banks Create Money Because

question 97

Multiple Choice

In a fractional-reserve banking system, banks create money because:

• A) each dollar of reserves generates many dollars of demand deposits.
• B) banks have the legal authority to issue new currency.
• C) funds are transferred from households wishing to save to firms wishing to borrow.
• D) the wealth of the economy expands when borrowers undertake new debt obligations.

---

Definitions:

Eighteenth Century

The period of time from January 1, 1701, to December 31, 1800, in the Gregorian calendar.

Sugar, Rice

Key agricultural products, where "sugar" refers to the sweet-tasting, soluble carbohydrates extracted from sugarcane or sugar beets and "rice" is a staple grain consumed globally.

European Weapons

Firearms, swords, and other armaments produced in Europe, historically significant in military conflicts and the colonization process.

Militarized States

Countries or regions in which military power is significantly emphasized and military institutions play a central role in governance and societal organization.