Which of the following statements is true?
A) The process of deposit expansion decreases the amount of money a bank can lend to borrowers.
B) The process of deposit expansion is forbidden by the Federal Reserve.
C) The Federal Reserve uses deposit expansion to counteract the effects of inflation.
D) The Federal Reserve uses deposit expansion to slow down the growth rate of the economy.
E) Deposit expansion can increase the amount of money a bank can lend to borrowers.

Question

Quizplus · Accepted Answer

Deposit expansion can increase the amount of money a bank can lend to borrowers. When a bank receives a deposit, it can use that money to make loans, thereby expanding the amount of money in circulation. This process is known as deposit expansion.

Which of the Following Statements Is True