Jane has just deposited $2,000 in her checking account. She knows that the bank will keep part of these funds on hand and loan out the rest. This is an example of

Question

Quizplus · Accepted Answer

Fractional reserve banking is the practice where banks keep only a fraction of their deposits as reserves and lend out the rest. In this scenario, Jane's bank will keep a portion of her deposit as reserves and lend out the remainder. The Federal Reserve System and sweep accounts are not relevant in this context. Excess reserves refer to any reserves held by banks above the required reserve ratio.

Jane Has Just Deposited $2,000 in Her Checking Account