What is one significant characteristic of fractional reserve banking?
A)Banks hold a fraction of their loans in reserve.
B)Banks use deposit insurance for loans to customers.
C)Bank loans will be equal to the amount of gold on deposit.
D)Banks can create money through lending their reserves.

Question

Quizplus · Accepted Answer

Fractional reserve banking allows banks to lend out a portion of their deposits, effectively creating new money in the economy through the lending process.

What Is One Significant Characteristic of Fractional Reserve Banking