Individual Chartered Banks Are Limited in Their Ability to Create

question 18

Multiple Choice

Individual chartered banks are limited in their ability to create money by lending because:

• A)lending is likely to result in the loss of reserves to other banks.
• B)only the Department of Finance is authorized to create new money.
• C)the Bank of Canada prohibits bank lending when the result is an expansion of the money supply.
• D)banking is a highly competitive industry.

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Definitions:

Maker

In the context of contracts, the party who creates or signs a promissory note to pay a certain amount of money to another party.

Drawer

In banking and finance, a drawer refers to the party that writes and signs a check or draft, directing a bank or other financial institution to pay a specified amount to a named payee.

Time Certain

A term used to specify an exact time at which an event or action is planned to take place.

On Demand

Refers to goods, services, or information being available whenever requested by customers or users.