In a system of 100-percent-reserve banking,
A)banks do not accept deposits.
B)banks do not influence the supply of money.
C)loans are the only asset item for banks.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

In a system of 100-percent-reserve banking, banks do not influence the supply of money because they do not create money through the lending process. They only act as intermediaries between savers and borrowers by lending out the funds deposited with them by savers. This means that the supply of money is determined by the amount of reserves held by the central bank, and not by the loans made by banks. However, banks still accept deposits and can have asset items other than loans such as securities and cash reserves.

In a System of 100-Percent-Reserve Banking