Banks could not create money if
A) the required reserve ratio was zero.
B) the Bank of Canada stopped selling bonds.
C) people held no money as cash.
D) people held all their money as cash.
E) people stopped using bank machines.

Question

Quizplus · Accepted Answer

Banks create money by lending out a portion of the deposits they hold. If people hold all their money as cash, there are no deposits to lend out and therefore banks cannot create money.

Banks Could Not Create Money If