Question

question 1
1 pts
banks create money by
buying u.s. government securities with cash.
making loans and creating deposits, a process that is limited by the size of banks’ excess reserves.
printing dollar bills without limit.
creating deposits without limit.
printing money up to their required reserve limit.

Explanation:

Banks create money through the loan - deposit process. When a bank makes a loan, it credits the borrower's account, creating a deposit. However, this is not unlimited. Banks are required to hold a certain amount of reserves (required reserves). The amount of money creation is limited by the excess reserves (reserves above the required amount). Buying U.S. government securities with cash is an action of the Federal Reserve (not a typical way banks create money). Banks do not print dollar bills (that's the job of the Bureau of Engraving and Printing). Creating deposits without limit is incorrect due to reserve requirements. And banks do not print money at all (they create deposits through lending).

Answer:

making loans and creating deposits, a process that is limited by the size of banks' excess reserves.