In a system with 100-percent-reserve banking:
A) all banks must hold reserves equal to 100 percent of their loans.
B) no banks can make loans.
C) the banking system completely controls the size of the money supply.
D) no banks can accept deposits.

Question

Quizplus · Accepted Answer

In a system with 100-percent-reserve banking, banks are required to hold reserves equal to 100 percent of their deposits, which means they cannot make any loans as they do not have any excess reserves to lend out. Therefore, option B is the best choice.

In a System with 100-Percent-Reserve Banking