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  • Question
  • In a fractional reserve banking system


  • Options
  • A. bank accepts deposits
  • B. bank accepts some loans
  • C. bank has some cash reserves
  • D. All the above

  • Correct Answer
  • All the above 

    Explanation

    Fractional reserve banking is the practice whereby a bank accepts deposits, makes loans or investments, but is required to hold reserves equal to only a fraction of its deposit liabilities. Fractional reserve banking is a banking system in which only a fraction of bank deposits are backed by actual cash on hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties.

  • Tags: Bank Exams, CAT, Analyst, Bank Clerk, Bank PO

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