Explain what is meant by fractional reserve banking.
What will be an ideal response?
Fractional reserve banking is the system that exists in the United States whereby financial institutions are required to keep only a fraction of their customer check able deposits in reserve. They may lend out or invest the remainder in qualified securities. This system allows banks to “create” money through the loans that they make.
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If in a market the last unit of output was sold at a price higher than marginal cost
A) producer is better off producing more. B) consumers are better off if less of the product is sold. C) social welfare is not maximized. D) the unit increased total profit.
Which of the following is not an example of the principle that trade can make everyone better off?
a. Americans buy tube socks from China. b. Residents of Maine drink orange juice from Florida. c. A homeowner hires the kid next door to mow the lawn. d. All of the above are examples of the principle that trade can make everyone better off.