What is the major difference between full-reserve banking and fractional-reserve banking?(1 point)

Question

Responses

Fractional-reserve banks borrow and store funds from lenders while full-reserve banks deal with corporations.
Fractional-reserve banks borrow and store funds from lenders while full-reserve banks deal with corporations.

Fractional-reserve banks only hold a portion of all deposits made while full-reserved banking hold 100% of every depositor's funds on hand.
Fractional-reserve banks only hold a portion of all deposits made while full-reserved banking hold 100% of every depositor's funds on hand.

Fractional-reserve banks provide smaller loans compared to full-reserve banks.
Fractional-reserve banks provide smaller loans compared to full-reserve banks.

Full-reserve banks only hold a portion of all deposits made while fractional-reserved banking hold 100% of every depositor's funds on hand.

Answer 1

The correct response is:

Fractional-reserve banks only hold a portion of all deposits made while full-reserved banking hold 100% of every depositor's funds on hand.

This statement accurately captures the fundamental difference between the two banking systems. In fractional-reserve banking, banks keep a fraction of deposits as reserves and use the majority for lending, while in full-reserve banking, banks hold the entire amount of each depositor's funds in reserve, providing greater security for depositors.