Question

How does fractional-reserve banking influence the money supply in the United States?(1 point)
Responses

Fractional-reserve banks borrow and store funds from lenders, decreasing the number of physical dollars in circulation.
Fractional-reserve banks borrow and store funds from lenders, decreasing the number of physical dollars in circulation.

Fractional-reserve banks store the entirety of every depositor's funds, limiting the amount of currency in circulation.
Fractional-reserve banks store the entirety of every depositor's funds, limiting the amount of currency in circulation.

Fractional-reserve banks are permitted to print currency, increasing the number of physical dollars in circulation.
Fractional-reserve banks are permitted to print currency, increasing the number of physical dollars in circulation.

Fractional-reserve banks issue depositor funds to borrowe

Answer 1

Fractional-reserve banks lend out a portion of the funds deposited by customers, thereby increasing the money supply through the creation of new loans and deposits.