5. The fundamental explanation of why commercial banking system can create money

Question

5. The fundamental explanation of why commercial banking system can create money lies in: a. b. fractional reserve system federal reserve system c. the consumption function a. private ownership 7. Bank create money when they a. b. c. d. exchange checkable deposits with cash accept cash deposits buy government securities add their deposits with the Fed 8. With the Federal Reserve Act, the Fed is independent of the Congress and the President a. b. c. d. directly answer to the Congress directly answer to the President directly answer to the Treasury 9, With a required 10% reserve ratio, a banking system, which receives initial cash deposits of $1,000, is available to create the maximum amount of money (deposits): a $10,000 b. $9,000 c. $900 d. $1,000

Explanation / Answer

5.Ans: a. fractional reserve system.

7.Ans: a.  exchange checkable deposits for cash

8.Ans: a. independant of the congress and the president.

9.Ans:a. $10,000

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