What Is One Significant Characteristic of Fractional Reserve Banking

question 180

Multiple Choice

What is one significant characteristic of fractional reserve banking?

• A) Banks hold a fraction of their loans in reserve.
• B) Banks use deposit insurance for loans to customers.
• C) Bank loans will be equal to the amount of gold on deposit.
• D) Banks can create money through lending their reserves.

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Definitions:

Preferential Treatment

Practices or policies that give favorable tax treatment to certain transactions, investments, or income, often to encourage specific economic activities.

Holding Period

The duration of time an investment is owned or held by an investor, which can affect the tax implications of the investment's gains or losses.

Gift Tax

A federal tax on the transfer of property by gift during the donor's lifetime, intended to prevent tax avoidance through the transfer of wealth.

Long-term Loss

A financial loss realized on the sale or exchange of an asset held for more than one year, affecting capital gains tax calculations.