The Basic Principle Behind Fractional-Reserve Banking Is That

question 55

Multiple Choice

The basic principle behind fractional-reserve banking is that

• A) on a daily basis new deposits tend to equal withdrawals.
• B) loans and investments are made with funds advanced by bank owners.
• C) banks hold reserves either in the form of cash or deposits with the Federal Reserve banks.
• D) a bank's assets are equal to its liabilities plus net worth.
• E) there is a legal limit on the amount of reserves banks must retain against their loans.

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