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:

Checking Account

A type of bank account that allows for easy access to funds for daily transactions through checks, debit cards, or electronic means.

M1

A category of the money supply that includes all physical currency, demand deposits, traveler's checks, and other checkable deposits.

U.S. Treasury

The federal department responsible for managing government revenue, including producing currency, managing national accounts, and administering public finance.

Currency

A system of money in general use in a particular country for the exchange of goods and services.