Which of the following most clearly limits the ability of the commercial banking industry to expand the money supply?
A) The reserve requirements mandated by the Fed.
B) The number of commercial bank charters issued by the Fed.
C) The dollar value of the bonds issued by the U.S. Treasury.
D) The federal funds interest rate that commercial banks pay (and receive) for short-term loanable funds.

Question

Quizplus · Accepted Answer

The reserve requirements mandated by the Fed limit the ability of commercial banks to expand the money supply. Banks are required to hold a certain percentage of their deposits in reserve, which cannot be lent out. This means that banks have less money available to lend out, which reduces their ability to expand the money supply.

Which of the Following Most Clearly Limits the Ability of the Commercial