If banks operated under a 100 percent reserve system,commercial banks would not be able to create any further money.

Question

Quizplus · Accepted Answer

Under a 100 percent reserve system, banks would only be able to lend out money that they actually have in reserve. They would not be able to create new money through the act of lending, so the money supply would be constrained by the amount of money already in circulation.

If Banks Operated Under a 100 Percent Reserve System,commercial Banks