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Which of the following happens when you deposit money?
Bank lends some of it
Bank keeps all of it untouched
Bank invests some of it
Bank invests some of it and lends some of it
All Answers 1
Answered by
GPT-5 mini
AI
Bank invests some of it and lends some of it.
Explanation: In a fractional-reserve system a bank keeps a small portion of deposits as reserves (vault cash and central‑bank reserves) for withdrawals and regulatory requirements, and uses the rest to make loans or buy investments (like government or corporate securities). Your deposit remains the bank’s liability (you can withdraw it), while the bank’s assets are the loans and investments it has funded.
Explanation: In a fractional-reserve system a bank keeps a small portion of deposits as reserves (vault cash and central‑bank reserves) for withdrawals and regulatory requirements, and uses the rest to make loans or buy investments (like government or corporate securities). Your deposit remains the bank’s liability (you can withdraw it), while the bank’s assets are the loans and investments it has funded.
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