Table 11-5.

-Refer to Table 11-5. From the table it follows that the Bank of Pleasantville operates in a
A) fractional-reserve banking system, since its reserves are less than its deposits.
B) fractional-reserve banking system, since its reserves are less than its loans.
C) 100-percent-reserve banking system, since its assets are equal to its liabilities.
D) 100-percent-reserve banking system if the Fed's reserve requirement is 10 percent; otherwise, it operates in a fractional-reserve banking system.

Question

Table 11-5.
 
-Refer to Table 11-5. From the table it follows that the Bank of Pleasantville operates in a
A) fractional-reserve banking system, since its reserves are less than its deposits. 
B) fractional-reserve banking system, since its reserves are less than its loans. 
C) 100-percent-reserve banking system, since its assets are equal to its liabilities. 
D) 100-percent-reserve banking system if the Fed's reserve requirement is 10 percent; otherwise, it operates in a fractional-reserve banking system.

Quizplus · Accepted Answer

In a fractional-reserve banking system, banks hold reserves that are less than the total amount of customer deposits, allowing them to lend out a portion of deposits. Since the Bank of Pleasantville's reserves are less than its deposits, it operates in a fractional-reserve banking system.

Table 11-5. -Refer to Table 11-5. from the Table It Follows That