A banking system that provides people immediate access to their deposits, but that allows banks to hold only a portion of those deposits on reserve, is known as:
A) an excess reserve system.
B) a fractional reserve system.
C) the Fed.
D) the FDIC.
E) an asset-based system.

Question

Quizplus · Accepted Answer

A fractional reserve system is where banks hold only a fraction of their customers' deposits on reserve, allowing them to lend out the majority of the funds to other borrowers. This allows for immediate access to deposits, but also creates the potential for a run on the bank if too many customers withdraw their funds at the same time.

A Banking System That Provides People Immediate Access to Their