Question

How does the practice of fractional reserve banking affect banks?
O A. It gives banks the freedom to change interest rates on loans at
any time
B. It allows banks to keep only a small percentage of their deposits in
reserve
O C. It prevents banks from profiting off loans they provide with
deposited funds.
OD. It ensures that banks always have cash reserves equal to their
total deposits

Answer 1

Answer:B

Explanation:

A.P.E.X

Answer 2

The practice of fractional banking allows the banks to maintain very small reserves against the bank deposits.

What is fractional banking?

Fractional banking is a facility brought into the effect by the American Federal Reserve.

With the introduction of this facility, the commercial bank have are mandated to maintain a very small percentage of funds as reserves as against the total deposits maintained by them.

Hence, option B holds true regarding the fractional banking.

Learn more about fractional banking here:

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