When bank loans are repaid and the banks hold on to the funds as additional reserves, then the banking system's
ability to "create" money decreases.

Name: When bank loans are repaid and the banks hold on to the funds as additional reserves, then the banking system's ability to "create" money decreases.
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Question

Quizplus · Accepted Answer

When banks hold on to the funds, they cannot lend them out, which reduces their ability to create new money through lending.

When Bank Loans Are Repaid and the Banks Hold on to the Funds