Any bank that uses deposits to make loans
A)operates on a 100 percent reserve system
B)operates on a fractional reserve system
C)does not operate on a reserve system
D)does not keep reserves
E)charges an interest rate determined by the reserve ratio

Question

Quizplus · Accepted Answer

Banks that use deposits to make loans operate on a fractional reserve system, which means they keep a fraction of deposits as reserves and lend out the rest. This allows banks to create money through the process of lending, but also exposes them to risks such as bank runs and insolvency if too many depositors try to withdraw their funds at once.

Any Bank That Uses Deposits to Make Loans