If you deposit $1,000 in your checking account,your bank is only required to hold a portion of the deposit and is allowed to lend out the balance.This illustrates the concept known as:

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The concept of banks holding only a fraction of the deposits and lending out the remaining balance is known as fractional reserves. This system allows banks to generate profits by earning interest on loans while also meeting the demand for cash withdrawals from depositors. The amount of reserves that banks are required to hold is determined by regulators and is typically based on a percentage of the deposits held by the bank.

If You Deposit $1,000 in Your Checking Account,your Bank Is