Fractional reserve banking involves banks lending out a portion of depositors' money while keeping some for withdrawals, impacting the money supply statistics.
Fractional reserve banking is a system where banks do not keep all deposits in the vault, allowing them to lend out some of the depositors' money while keeping some to meet withdrawal demands. When a bank issues a loan in this system, it creates new money, impacting the overall money supply stats (The different forms of money in the government money supply statistics).
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