A fractional reserve banking system might be in trouble if
A) one depositor wanted his (her)money returned.
B) one borrowing customer paid off the loan.
C) all borrowing customers paid off their loans.
D) all deposit customers wanted to withdraw their money.
E) None of the above.

Question

Quizplus · Accepted Answer

The fractional reserve banking system relies on the fact that not all depositors will withdraw their money at once, so the bank can use a portion of those deposits to make loans and earn interest. However, if all depositors wanted to withdraw their money at the same time, the bank would not have enough reserves on hand to honor those withdrawals and would be in trouble.

A Fractional Reserve Banking System Might Be in Trouble If