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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

    Accounting and Finance problems


    Search Results


    • 1. The reserves of a commercial bank consist of

    • Options
    • A. the bank's net worth
    • B. the amount of money market funds it holds
    • C. government securities that the bank holds
    • D. deposits at the Federal Reserve Bank and vault cash
    • Discuss
    • 2. What is true about certificates of deposit?

    • Options
    • A. the money has to remain in the account for a specified period of time
    • B. they are the most liquid account available
    • C. they offer lower interest rates than savings accounts
    • D. All the above
    • Discuss
    • 3. Reconciling the bank statement monthly is an example of

    • Options
    • A. establishment of responsibility
    • B. independent internal verification
    • C. documentation procedures
    • D. segregation of duties
    • Discuss
    • 4. How can investors receive compounding returns?

    • Options
    • A. By investing their earnings back into their original investment
    • B. By diversifying their investment portfolio
    • C. By selecting a savings account that has a higher interest rate
    • D. By transferring their earnings back into high-risk investment
    • Discuss
    • 5. The accounting software Tally was developed by

    • Options
    • A. Wipro
    • B. TCS
    • C. HCL
    • D. Infosys
    • Discuss
    • 6. Compounding interest means interest accrues

    • Options
    • A. at variable rates throughout the term
    • B. more quickly than simple interest
    • C. more slowly than simple interest
    • D. at the same rate as simple interest
    • Discuss
    • 7. Which investment type typically carries the least risk?

    • Options
    • A. Mutual funds
    • B. Treasury bonds
    • C. Savings account
    • D. Individual stocks
    • Discuss
    • 8. The credit balance in the bank account is

    • Options
    • A. amount liable to pay by bank
    • B. amount liable to pay by customer
    • C. Both A + B
    • D. None of the above
    • Discuss
    • 9. Most financial investments are examples of what type of risk?

    • Options
    • A. Credit risk
    • B. Longevity risk
    • C. Human risk
    • D. Inflation risk
    • Discuss
    • 10. The interest-rate effect suggests that

    • Options
    • A. an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.
    • B. a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending
    • C. an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending.
    • D. an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending.
    • Discuss


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