What Is Meant by a Fractional Reserve Banking System

question 24

Multiple Choice

What is meant by a fractional reserve banking system?  

• A) Only a fraction of the banks in the system are allowed to create money. 
• B) Only a fraction of the banks in the system have reserves. 
• C) The claims outstanding against the bank are only a fraction of the bank's total reserves. 
• D) Bank reserves represent only a fraction of bank deposits.

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Definitions:

Customers

Individuals or entities that purchase goods or services from a business.

Preemptive Rights

Rights that allow existing shareholders to buy additional shares before new shares are offered to the public, thus maintaining their percentage of ownership.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another when entrusted with care of money or property.

Votes

Formal indications of a choice made from among options or decisions, often used in the context of elections or decision-making processes in organizations.