What Do We Mean in Our Current Banking System When

question 115

Multiple Choice

What do we mean in our current banking system when we say that a currency is "fractionally backed"?

• A)Banks have many more claims outstanding against them than they have reserves available to pay those claims.
• B)The currency is partially backed by the nation's supply of gold.
• C)A bank's currency is fractionally backed by its supply of gold.
• D)All paper currency is convertible to gold.
• E)Banks maintain a fixed fraction of their outstanding deposits as cash deposits with the central bank.

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