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.

---

Definitions:

Diencephalon

A part of the brain containing elements including the thalamus and hypothalamus, responsible for sensory processes and involuntary bodily operations.

Flocculonodular Lobe

The flocculonodular lobe is a region of the cerebellum involved in balance and eye movements.

Cerebellar Peduncles

Nerve fiber bundles that connect the cerebellum to the brainstem, facilitating communication.

Arbor Vitae

The treelike structure of white matter in the cerebellum that serves to connect cerebellar cortex and nuclei with the cerebellar peduncles.