In a fractional-reserve banking system,a bank
A)does not make loans.
B)does not accept deposits.
C)keeps only a fraction of its deposits in reserve.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

In a fractional-reserve banking system, banks keep only a fraction of its deposits in reserve and use the rest to make loans and investments. So, option C is the correct choice as it reflects the nature of fractional reserve banking. Options A and B are incorrect as banks make loans and accept deposits in a fractional reserve banking system. Option D is also incorrect as there is at least one correct statement provided in the other options.

In a Fractional-Reserve Banking System,a Bank