The Main Feature of Fractional Reserve Banking Is That Banks

question 177

Multiple Choice

The main feature of fractional reserve banking is that banks:

• A) lend out as little as possible to avoid becoming insolvent.
• B) keep most of its deposits in a vault in order for customers to have easy access to cash.
• C) keep a portion of deposits in reserves but lend out the rest.
• D) invest all of its deposits in a combination of stocks and bonds.

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Definitions:

Market

A facility that enables the transaction of various goods, services, and information between purchasers and vendors.

Production Technology

Refers to the methods, equipment, and software used to produce goods and services.

Firms' Costs

The expenses incurred by businesses in the production of goods or services, including labor, materials, and overhead costs.

Quantity Supplied

The extent of a good or service that merchants are willing and have the capacity to offer at a pre-determined price.