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)banks can increase the money supply.

Question

Quizplus · Accepted Answer

In a 100-percent-reserve banking system, banks hold all deposits in reserve, meaning they do not loan out any of the deposits they receive. Therefore, they do not create new money through lending, leaving the supply of money unchanged.

In a System of 100-Percent-Reserve Banking