The Fractional Reserve System of Banking Evolved Because

question 54

Multiple Choice

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.

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Definitions:

Debit Entries

Accounting records that increase expenses or assets, or decrease equity, liabilities, or revenue.

Credit Entries

Credit entries are accounting entries that increase liabilities or equity or decrease assets, recorded on the right side of an accounting ledger.

Cash Account

A ledger account that tracks cash transactions, including receipts and payments, highlighting the available cash balance.

Normal Balances

The side (debit or credit) of an account that is increased, reflecting the conventional balance based on the account's classification within the accounting equation.