Answer :
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Banks do have the ability to create money through a process known as fractional reserve banking. Here's how it works:
1. When you deposit money into a bank, they are required to keep only a fraction of that deposit in reserve (usually around 10%) and are allowed to lend out the rest.
2. This means that the bank can create money by effectively "multiplying" the initial deposit through lending. For example, if you deposit $100, the bank can lend out $90 of that while keeping $10 in reserve. The $90 can then be deposited by the borrower into another bank, and the process can continue.
3. As a result, new money is effectively created through this lending process. This is why it is said that banks have the ability to create money.
So, the statement "Banks create money" is true, given the process of fractional reserve banking.
