Banking under a system of fractional reserves is a(n)

Question

Quizplus · Accepted Answer

Banking under a system of fractional reserves is inherently risky as banks keep only a fraction of deposits as cash reserves and lend out the rest. However, under prudent management, such risks can be minimized and the business can be relatively safe. Therefore, option B is the best choice. Options A and C have extreme positions, and option D is too optimistic as fractional reserve banking involves risks.

Banking Under a System of Fractional Reserves Is A(n)