A bank's assets equal its liabilities under
A) both 100-percent-reserve banking and fractional-reserve banking.
B) neither 100-percent-reserve banking nor fractional-reserve banking.
C) 100-percent-reserve banking but not under fractional-reserve banking.
D) fractional-reserve banking but not under 100-percent-reserve banking.

Question

Quizplus · Accepted Answer

In both 100-percent-reserve banking and fractional-reserve banking, a bank's assets must equal its liabilities. In 100-percent-reserve banking, the bank holds reserves equal to 100% of its deposits, which means that all deposits are backed by an equal amount of assets. In fractional-reserve banking, the bank is only required to hold a percentage of its deposits as reserves, but it must still ensure that its assets are sufficient to cover its liabilities.

A Bank's Assets Equal Its Liabilities Under