Final answer:
Individual banks can only lend out their excess reserves, not more. The commercial banking system as a whole can only lend out an amount equivalent to its total excess reserves. The expansion of the money supply is governed by the money multiplier effect in a multi-bank system.
Step-by-step explanation:
When examining the true statements about commercial banks and individual banks, we need to consider how money is created within the banking system. An individual bank can lend out an amount equal to its excess reserves, but it cannot lend out more. The entire commercial banking system can, however, lend only an amount equal to its collective excess reserves.
Through the process where banks lend out their excess reserves and these funds are re-deposited in other banks, additional loans can be made, ultimately leading to an expansion of the money supply. This is determined by the money multiplier effect, which indicates how much new money can be generated from the original amount of excess reserves.