The banking system in the United States creates money through the combination of excess reserves and

Question

Quizplus · Accepted Answer

The banking system in the United States creates money through a process known as fractional-reserve banking, which involves banks lending out a portion of their excess reserves to borrowers. This creates new money in the economy, as the borrower now has funds that can be spent, while the original deposit remains in the bank and is counted as a liability on the bank's balance sheet. Therefore, the correct answer is A) banks loaning excess reserves.

The Banking System in the United States Creates Money Through