U.S. Banking in the 20th Century Quick Check

Question

2 of 52 of 5 Items
Question
Which of the following describes the practice of fractional-reserve banking?(1 point)
Responses

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.

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.

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

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.

Fractional-reserve banking allows banks to keep only a fraction of deposits as reserves and lend out the rest.