Banks
A) cannot create money.
B) create money by making loans using the deposits of their customers.
C) create money by printing it.
D) create money by getting currency from the U.S. Bureau of Engraving and Printing and handing it out to favored clients.

Question

Quizplus · Accepted Answer

Banks create money by making loans using the deposits of their customers. This is known as the fractional reserve banking system, where banks are required to hold only a fraction (usually 10%) of their deposits as reserves, allowing them to lend the remaining amount to borrowers. This process of lending creates new money in the economy.