The goldsmith's ability to create money was based on the fact that:
A)withdrawals of gold tended to exceed deposits of gold in any given time period.
B)consumers and merchants preferred to use gold for transactions, rather than paper money.
C)the goldsmith was required to keep 100 percent gold reserves.
D)paper money was rarely redeemed for gold.

Question

Quizplus · Accepted Answer

The goldsmiths issued paper receipts for gold deposits, and these receipts were rarely redeemed for actual gold, allowing them to lend out more receipts than the gold they physically held.

The Goldsmith's Ability to Create Money Was Based on the Fact