ECONOMICS
MONETARY POLICY
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Banks are required to keep a portion of all deposits on hand, either on deposit withe the Fed or in the vault
|
|
|
our currency needs to be backed up by an allotment of precious metals
|
|
|
credit cards debt can not be greater than the amount of M1
|
|
|
None of the above
|
Detailed explanation-1: -Fractional reserve banking is a system in which only a fraction of bank deposits are required to be available for withdrawal. Banks only need to keep a specific amount of cash on hand and can create loans from the money you deposit. Fractional reserves work to expand the economy by freeing capital for lending.
Detailed explanation-2: -Under a fractional reserve system, banks are required to keep a portion of their total deposits in the form of legal reserves. Banking with fractional reserves results in a monetary expansion process that increases the total money supply available to the public.
Detailed explanation-3: -In the US banking system, the value of reserves with the central bank is only a fraction of the actual money in supply. Thus it is called a fractional reserve system.
Detailed explanation-4: -Cash reserve Ration (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank of a country.
Detailed explanation-5: -The required reserve ratio gives the percent of deposits that banks must hold as reserves. It is the ratio of required reserves to deposits. If the required reserve ratio is 10 percent this means that banks must hold 10 percent of their deposits as required reserves.