Which of the Following Correctly Describes Fractional Reserve Banking

question 98

Multiple Choice

Which of the following correctly describes fractional reserve banking?

• A) The federal government only insures a fraction of the deposits at most banks.
• B) Banks keep a fraction of their loans with other banks to maintain the quality of their loan portfolio.
• C) Banks can loan out all but a small fraction of its own money, but must hold all money deposited at the bank on reserve in bank vaults.
• D) Banks can loan out all but a fraction of its own money, but must hold all money deposited at the bank on reserve in bank vaults.

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