What essential factor enables commercial banks to create money?

Question

Quizplus · Accepted Answer

Excess reserves enable commercial banks to create money through the process of lending. When a bank has excess reserves, it can lend out money to borrowers, creating new deposits in the process.

Answer: D 
 U.S. government securities serve as collateral for banks to borrow from the Federal Reserve. By borrowing from the Fed, banks can increase their reserves, which in turn enables them to make more loans and create more money.

What Essential Factor Enables Commercial Banks to Create Money