What is one significant consequence of fractional reserve banking?
A)Banks are vulnerable to "panics" or "bank runs."
B)Banks can only lend an amount equal to their deposits.
C)Banks hold a portion of their deposits in gold.
D)Banks can serve the withdrawals of all their depositors.

Question

Quizplus · Accepted Answer

Fractional reserve banking means banks keep only a fraction of deposits as reserves, making them vulnerable to bank runs if too many depositors withdraw simultaneously.

What Is One Significant Consequence of Fractional Reserve Banking