When a Fractional Reserve Banking System Is Present, Can the Banking

question 4

Multiple Choice

When a fractional reserve banking system is present, can the banking system impact the money supply?

• A) No, policymakers set the level of the money supply, and banks are not free to make decisions that impact the money supply.
• B) No, the fractional reserve constraint prevents banks from impacting the money supply.
• C) Yes, at the moment that a bank accepts a deposit of cash, the money supply immediately increases.
• D) Yes, banks decide how much of their excess reserves to loan out. When the loans are made, the money supply grows.

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Definitions:

Quarterly Savings

Savings accumulated or set aside at the end of every quarter of the fiscal year.

Rate Of Return

Financial advancement or recession in the value of an investment over a prescribed time frame, stated as a percentage of the initiating investment.

Financing Balance

Represents the outstanding amount in a financing arrangement that has yet to be repaid.

Monthly Payments

Regular payments made once a month, often related to loans or leases.