Which of the following does not constrain deposit creation?
A) Consumers and businesses decide to take money out of transactions accounts and hold it as cash.
B) Consumers,businesses,and governments decide to stop borrowing.
C) Banks decide to stop lending money to qualified borrowers.
D) The Federal Reserve decides to reduce the minimum reserve requirement.

Question

Quizplus · Accepted Answer

Reducing the minimum reserve requirement allows banks to hold less money in reserve and increases their capacity to create more deposits through lending. This action does not constrain deposit creation; rather, it potentially expands it by allowing banks to lend out a greater portion of their deposits.

Which of the Following Does Not Constrain Deposit Creation