The banking system in the United States creates money through the combination of excess reserves and

Question

Quizplus · Accepted Answer

When banks have excess reserves, they are able to use those reserves to make loans to individuals and businesses. These loans, in turn, create new deposits, effectively creating new money in the system. Therefore, banks loaning excess reserves is the mechanism through which the banking system in the United States creates money.

The Banking System in the United States Creates Money Through