If most individuals accept paper currency in transactions,and paper currency is "backed by" gold held by commercial banks,then banks can safely issue

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If paper currency is backed by gold held by commercial banks, then banks can issue more paper currency than the value of the gold they hold, as they can also issue currency based on other assets and liabilities they hold, such as loans and deposits. This is known as fractional reserve banking, where banks only need to hold a fraction of their deposits in reserve, and can lend out the rest to generate interest income. However, this also means that banks can create money out of thin air, which can lead to inflation if not managed properly.

If Most Individuals Accept Paper Currency in Transactions,and Paper Currency