Table 16-5.
-Refer to Table 16-5. From the table it follows that the Bank of Pleasantville operates in a
A)fractional-reserve banking system, since its reserves are less than its deposits.
B)fractional-reserve banking system, since its reserves are less than its loans.
C)100-percent-reserve banking system, since its assets are equal to its liabilities.
D)100-percent-reserve banking system if the Fed's reserve requirement is 10 percent; otherwise, it operates in a fractional-reserve banking system.

Question

Table 16-5. 
-Refer to Table 16-5. From the table it follows that the Bank of Pleasantville operates in a
A)fractional-reserve banking system, since its reserves are less than its deposits. 
B)fractional-reserve banking system, since its reserves are less than its loans. 
C)100-percent-reserve banking system, since its assets are equal to its liabilities. 
D)100-percent-reserve banking system if the Fed's reserve requirement is 10 percent; otherwise, it operates in a fractional-reserve banking system.

Quizplus · Accepted Answer

In a fractional-reserve banking system, banks hold reserves that are less than the total amount of customer deposits. This allows them to lend out a portion of deposits, which is indicated by reserves being less than deposits.

Table 16-5. -Refer to Table 16-5. from the Table It Follows That