The Reason Why the Banking System Can Increase Checkable Deposits

Multiple Choice

The reason why the banking system can increase checkable deposits by a multiple of initial deposits is that:

A) the banking system must keep reserves equal to 100 percent of its checkable deposits.
B) the central bank follows policies that prevent reserves from falling below the level required by law.
C) reserves lost by any particular bank are gained by the Federal Reserve Bank.
D) borrowers often spend most of a loan which is then deposited.