Which of the Following Is True About Banks in a Fractional

question 110

Multiple Choice

Which of the following is true about banks in a fractional reserve banking system?

• A) Banks are able to create money when excess reserves are lent to individuals who need to borrow money.
• B) Banks can lend all of the deposits that are received.
• C) Banks must purchase gold that equals the value of the deposits received.
• D) Banks must deposit all cash from depositors with the Federal Reserve.
• E) Banks have to deposit all cash from depositors in their own bank vault.

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Definitions:

Physical Inventory

The process of counting all physical goods and materials a company has in stock at a specific point in time.

Items Count

The process of tallying items in inventory, usually for the purpose of ensuring accuracy in stock levels and financial records.

Retail Method

An accounting method for inventory valuation in which ending inventory and cost of goods sold are determined by applying a constant gross margin percentage.

Inventory Cost

The total cost associated with acquiring, holding, and processing inventory, including purchase costs, storage fees, and handling charges.