Why Is the Banking System Able to Increase Loans and Demand

question 61

Multiple Choice

Why is the banking system able to increase loans and demand deposits by a multiple of its excess reserves?

• A)Because reserves lost by one bank are gained by another.
• B)Because the MPC of borrowers is positive.
• C)Because one person's debt becomes another person's income.
• D)Because the target reserve ratio is greater than 1.

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Definitions:

Fourteenth Amendment

An amendment to the U.S. Constitution, adopted in 1868, that granted citizenship to all persons born or naturalized in the United States, including former slaves, and provided equal protection under the laws.

Literacy Requirements

Mandates or conditions set by authorities requiring individuals to demonstrate a certain level of reading and writing proficiency, often for voting or employment purposes.

United States V. Wong Kim Ark

A landmark Supreme Court case in 1898 that established that children born in the United States to foreign parents are citizens under the 14th Amendment.

Fourteenth Amendment

is an amendment to the U.S. Constitution, ratified in 1868, that grants citizenship to all persons born or naturalized in the United States and ensures equal protection under the laws.