Which of the following best describes a fractional reserve banking system?
OA. A banking system in which a large portion of the bank's assets are
digital money rather than bills and coins.
B. A banking system in which banks keep a portion of deposits on
hand to satisfy their customer's demands for withdrawals.
OC. A banking system in which banks have only partial control over the
interest rates they charge on loans.
D. A banking system in which net worth is calculated by subtracting a
fraction of liabilities from assets.

Question

04-06-2024
Business

Answered

Which of the following best describes a fractional reserve banking system?
OA. A banking system in which a large portion of the bank's assets are
digital money rather than bills and coins.
B. A banking system in which banks keep a portion of deposits on
hand to satisfy their customer's demands for withdrawals.
OC. A banking system in which banks have only partial control over the
interest rates they charge on loans.
D. A banking system in which net worth is calculated by subtracting a
fraction of liabilities from assets.

Answer :

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GinnyAnswer GinnyAnswer · Answer 1 · 2024-06-04T01:33:58-04:00

Final answer:

Fractional reserve banking involves banks lending out a portion of depositors' money while keeping some for withdrawals, impacting the money supply statistics.

Explanation:

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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