Under a 100% reserve system
A)banks could originate loans, but could not hold them.
B)the Fed's control over the money supply would be drastically reduced.
C)the monetary base would equal M1.
D)banks could not originate loans, but could hold them.

Question

Quizplus · Accepted Answer

Under a 100% reserve system, banks are required to keep the full amount of each depositor's funds in reserve, meaning they cannot lend out any of the deposits. This results in the monetary base (the total amount of a currency that is either in general circulation in the hands of the public or in the form of deposits held in the central bank's reserves) being equal to M1 (the money supply that includes physical currency and coin, demand deposits, traveler's checks, other checkable deposits, and negotiable order of withdrawal accounts).

Under a 100% Reserve System