If banks engage in fractional reserve banking, it means that

Question

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Fractional reserve banking is a banking system in which banks hold a fraction of the deposits as reserves and lend out the rest. The fraction held in reserve is typically less than 100 percent of the deposits, hence the term “fractional reserve.” This allows banks to create more money than they hold in reserve, which can increase the money supply and stimulate economic activity.

If Banks Engage in Fractional Reserve Banking, It Means That