How does fractional-reserve banking influence the money supply in the United States?

Question

a

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

Fractional-reserve banks issue depositor funds to borrowers, increasing the number of claims made on the same dollars.
c

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

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

Answer 1

b. Fractional-reserve banks issue depositor funds to borrowers, increasing the number of claims made on the same dollars.