Which of the following determines the amount of money the banking system as a whole can create?

Question

Quizplus · Accepted Answer

The amount of money that the banking system as a whole can create is determined by the quantity of bank reserves. When banks receive deposits, they are required to hold a fraction of those deposits as reserves. The rest of the funds can be loaned out, creating new money in the form of deposits for borrowers. This process, known as fractional reserve banking, allows banks to create more money than they actually hold in reserves, but the total amount of money created is limited by the quantity of reserves held by the banking system as a whole.

Which of the Following Determines the Amount of Money the Banking