The type of banking system under which banks are required to hold only a portion of their assets in reserve against the checking deposits of their customers is called
A) a gold-backed banking system.
B) a full reserve banking system.
C) a fiat banking system.
D) a fractional reserve banking system.

Question

Quizplus · Accepted Answer

A fractional reserve banking system allows banks to hold only a fraction (or portion) of their assets in reserve against the deposits of their customers. This means that banks can lend out the remaining portion of their deposits, which creates new money in the economy. This is the most common type of banking system used in modern economies.

The Type of Banking System Under Which Banks Are Required