The fractional reserve system of banking evolved because
a. goldsmiths did not have safes large enough to hold all their gold deposits.
b. there was always a dire need for additional money.
c. goldsmiths knew that on any given day, only a few depositors would come to claim their deposits.
d. goldsmiths knew that they would not be prosecuted for lending out money they did not have.
c
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Suppose that you know a good is a normal good for a consumer. Which of the following can you then conclude to be true:
A. The own-price elasticity of demand is less than -1. B. The income elasticity of demand is greater than 0. C. The own-price elasticity of demand is greater than -1. D. The income elasticity of demand is less than 0. E. Both (a) and (b). F. Both (a) and (d). G. Both (b) and (c). H. None of the above.
Imagine that Odyssey National is a brand new bank, and that its required reserve ratio is 10 percent. If it accepts a $1,000 cash deposit, then, excluding the $1,000 initial deposit, the banking system can increase the money supply by:
A. $900. B. $910. C. $1,000. D. $9,000.