How does the banking system create money?

Question

Quizplus · Accepted Answer

The banking system creates money by using excess reserves to create loans. When a bank receives a deposit, it is required to keep a percentage of it as reserves with the central bank. The remaining amount can be used to make loans to borrowers. This loan creates a new deposit, which can be used to make further loans, and so on. By doing this, banks are able to create multiple deposits from a single initial deposit, effectively creating new money.

How Does the Banking System Create Money