When a bank has excess reserves
A) it can make loans.
B) it can create money.
C) it has too many loans.
D) Both answers A and B are correct.

Name: When a bank has excess reserves A) it can make loans. B) it can create money. C) it has too many loans. D) Both answers A and B are correct.
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Question

Quizplus · Accepted Answer

When a bank has excess reserves, it can use those reserves to make loans and create new money through the banking system's multiplier effect. Therefore, both answers A and B are correct.

When a Bank Has Excess Reserves