When a Bank Makes Loans with Excess Reserves, It

question 96

Multiple Choice

When a bank makes loans with excess reserves, it

• A) creates money.
• B) destroys money.
• C) alters the composition of M₁.
• D) leaves the money supply unchanged.

---

Definitions:

Preferred Spending

the allocation of financial resources towards goods, services, or investments that are most favored or prioritized by an individual or entity.

City Council

The legislative body that governs a city, town, or municipality, responsible for making and enforcing local laws and policies.

Median-Voter Theorem

A theory suggesting that the outcome of majority voting processes will reflect the preferences of the median voter when preferences are single-peaked and voters are fully informed.

Middle-of-the-Road Positions

Political or policy positions that are not extreme, representing a moderate or centrist point of view.