Question

Which of the following describes the practice of fractional-reserve banking?(1 point)
Responses

A bank loans a percentage of every depositor's funds to borrowers.
A bank loans a percentage of every depositor's funds to borrowers.

The United States issues a currency that can be exchanged for a set amount of gold.
The United States issues a currency that can be exchanged for a set amount of gold.

The United States issues a currency that cannot be exchanged for a set amount of gold.
The United States issues a currency that cannot be exchanged for a set amount of gold.

A bank retains all deposited funds.
A bank retains all deposited funds.

Answer 1

The correct response that describes the practice of fractional-reserve banking is:

"A bank loans a percentage of every depositor's funds to borrowers."

In fractional-reserve banking, banks are required to keep only a fraction of their deposits in reserve and can loan out the remainder, thereby creating money through the lending process.