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

question 70

Multiple Choice

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

• A) each dollar of reserves generates many dollars of 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.

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Definitions:

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