When banks are required to hold a certain portion of deposits in the vault or on deposit at the Federal Reserve and cannot loan all deposits out to borrowers, we describe this banking system as a ______ banking system.
A) partial reserve
B) fiat
C) monetary target
D) fractional reserve

Question

Quizplus · Accepted Answer

This is known as a fractional reserve banking system, where banks are required to keep a fraction of their deposits in reserve and can lend out the remainder.

When Banks Are Required to Hold a Certain Portion of Deposits