An argument in favor of 100 percent reserve banking is that
A) a bank deposit is owned by the depositor, so the bank has no legal right to lend the deposit to someone else.
B) banks should be allowed to lend deposits in order to increase their profits and strengthen the banking system.
C) unregulated institutions would be riskier than regulated fractional-reserve banks.
D) it would limit the precision of the central bank's control over the quantity of money.

Question

Quizplus · Accepted Answer

100 percent reserve banking means that banks would keep the full amount of a depositor's funds in reserve, rather than lending out a portion of deposits as in fractional-reserve banking. The argument in favor of this system, as stated in option A, is based on the premise that since the deposit is owned by the depositor, the bank does not have the right to use these funds for lending to others. This perspective emphasizes the ownership rights of depositors over their funds.

An Argument in Favor of 100 Percent Reserve Banking Is