If there was only full-reserve banking:
A)the financial system would grind to a halt.
B)absolutely no lending using deposits would be able to occur.
C)banks would not make money lending deposits.
D)All of these are true.

Question

Quizplus · Accepted Answer

Full-reserve banking means that banks must hold 100% of their deposits in reserve, which means they cannot lend out any of the money that is deposited with them. This would grind the financial system to a halt, as lending is essential for economic growth. Additionally, banks would not be able to make money lending deposits, as they would not have any money to lend out.

If There Was Only Full-Reserve Banking