A Fractional Reserve Banking System Is a System Whereby

question 498

Multiple Choice

A fractional reserve banking system is a system whereby

• A) banks keep at least 100 percent of their deposits on hand as reserves.
• B) banks keep only a fraction of their deposits on hand as reserves.
• C) a central bank tells all banks what fraction of the population they can serve.
• D) banks specialize so that one type of bank handles one kind of deposit and another type of bank handles another type of deposit.

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Definitions:

Price Ceilings

Price controls that outlaw trade at prices above the ceiling.

Intended

Something that is planned or meant to happen in a specific way.

Price Floors

Price controls that outlaw trade at prices below the floor.

Intended

Designed or planned to serve a particular purpose.