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It is because when you spend the money and your check clears, your bank loses reserve deposits at the Fed and the other banks gain new reserve deposits at the Fed. Thus, reserves as well as deposits are redistributed among banks

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How does a bank create money through the process of fractional-reserve banking?

Banks create money through fractional-reserve banking by only keeping a fraction of deposits on hand and lending out the rest. This allows them to create new money through loans, increasing the money supply in the economy.


In what way did hamilton and jeffreson disagree on the economy and the banking system?

Hamilton and Jefferson had fundamental disagreements over the economy and banking system. Hamilton advocated for a strong central government and a national bank to stabilize the economy and promote industrial growth, believing that a robust financial system was essential for national strength. In contrast, Jefferson favored agrarianism and a decentralized economy, fearing that a powerful banking system could lead to corruption and undermine individual liberties. Jefferson's vision emphasized states' rights and the importance of agriculture, while Hamilton's approach sought to create a unified national economic framework.


Explain factors that limits banks ability to create money?

no ideal i need solution


How did Bill Gates become successful?

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How does the fractional reserve banking system impact the overall stability of the economy?

The fractional reserve banking system can impact the overall stability of the economy by potentially amplifying economic fluctuations. When banks create money through lending based on only a fraction of their reserves, it can lead to increased money supply and credit expansion. This can stimulate economic growth but also increase the risk of financial instability if loans are not repaid or if there is a sudden loss of confidence in the banking system.

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