A system that permits banks to hold less than 100 percent of their deposits as reserves is called a
A) federal reserve system.
B) fractional reserve banking system.
C) partially funded deposit insurance system.
D) gold standard banking system.

Question

Quizplus · Accepted Answer

A fractional reserve banking system allows banks to hold less than 100 percent of their deposits as reserves, typically around 10 percent, and use the rest for loans and investments. The other choices are not specific to this feature of banking reserves.

A System That Permits Banks to Hold Less Than 100