Why does the government take an active role in the regulation of the U.S.financial system?
A) Commercial banks are essential in paying for international trade.
B) To generate fees in addition to those paid to the FDIC
C) To help commercial banks dispose of assets
D) Commercial banks are essential to the creation of money.
E) To allow commercial banks to settle debt

Question

Quizplus · Accepted Answer

Commercial banks have the ability to create money through the process of fractional reserve banking, where they keep only a portion of deposits on hand and lend out the rest. This creates a need for government oversight and regulation to ensure the stability and integrity of the financial system.

Why Does the Government Take an Active Role in the Regulation