If people refused to use banks to create checkable deposits, the banking system would:
A) not be affected in the money creating process.
B) not have a way to loan out excess reserves.
C) be able to expand the money supply by more than the money multiplier indicates.
D) not be able to create new money.
E) not be able to find new borrowers.

Question

Quizplus · Accepted Answer

Checkable deposits are a key component in the money creation process of banks. If people refused to use banks to create checkable deposits, the banks would not have the ability to create new money through the process of fractional reserve banking. Therefore, the banking system would not be able to create new money.

If People Refused to Use Banks to Create Checkable Deposits