The amount of loans that a bank can create is limited by
A)the monetary base,the bank's desired reserves and desired currency holding.
B)only the monetary base
C)the real interest rate.
D)the bank's holding of government securities.
E)laws enacted by Parliament.

Question

Quizplus · Accepted Answer

The amount of loans that a bank can create is limited by the monetary base as it determines the amount of reserves the bank has. Additionally, the bank's desired reserves and desired currency holding also affect the amount of loans it can create as they determine how much of its deposits the bank wants to hold as cash or reserves. The other options, such as the real interest rate and the bank's holding of government securities, can affect the demand for loans or the bank's ability to make profits, but do not limit the amount of loans that the bank can create. There is no mention of laws enacted by Parliament affecting the amount of loans that a bank can create.

The Amount of Loans That a Bank Can Create Is