Question

Goldsmiths were able to practice an early form of fractional reserve banking because they knew that

Answer 1

Goldsmiths were able to practice an early form of fractional reserve banking because they knew that not all depositors would claim their gold at the same time.

Answer 2

The correct answer is - not all depositors would claim their gold at the same time.
Because not all people would want to take their investments at the same time, goldsmiths were able to give everyone what they wanted and needed. They would give the gold to a depositor at one point, and then they would gather more gold and give it to another depositor. Thus they pretty much invented fractional reserve banking.