Under a Fractional Reserve Banking System

question 11

Multiple Choice

Under 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)each bank must deposit a fraction of its reserves with the Federal Reserve Bank
• E)bank reserves represent only a fraction of bank deposits

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Definitions:

Operational Plans

Detailed plans that outline how a strategy will be implemented in terms of day-to-day operations.

Flexible Budget

A budget that shows the expected results of a responsibility center for several activity levels.

Static Budgets

Financial plans that remain unchanged over the budget period, irrespective of any variations in activity levels.

Master Budgeting

A comprehensive financial planning document that includes all of an organization's budgets for a specific period.