The Basic Reason Why the Commercial Banking System Can Increase

question 75

Multiple Choice

The basic reason why the commercial banking system can increase its checkable deposits by a multiple of its excess reserves is that:

• A) reserves lost by any particular bank will be gained by some other bank.
• B) the central banks follow policies that prevent reserves from falling below the level required by law.
• C) the MPC of borrowers is greater than zero but less than 1.
• D) the banking system must keep reserves equal to 100 percent of its checkable-deposit liabilities.

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To give something, such as money, goods, or time, to a common fund or cause.

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