When bank reserves exactly equal bank deposits,the bank is said to engage in
A) fractional reserve banking.
B) diversification.
C) 100%-reserve banking.
D) credit allocation.
E) open-market operations.

Question

Quizplus · Accepted Answer

100%-reserve banking refers to a system where bank reserves exactly equal bank deposits. In this system, banks would not be able to lend out any of the deposits they receive, resulting in a complete match between deposits and reserves. This is in contrast to fractional reserve banking, where banks are only required to hold a fraction of deposits in reserves, allowing them to lend out the remainder. Diversification, credit allocation, and open-market operations are not directly related to the level of bank reserves.

When Bank Reserves Exactly Equal Bank Deposits,the Bank Is Said