Question

For every dollar that you deposit into a bank, the bank will tend to:_________.

a) keep a portion of it and lend out the rest.
b) keep every penny as vault cash since it is such a small amount.
c) lend out every penny since almost all transactions are digital.

Answer 1

The answer is A.

Step-by-step explanation:

This system is known as Fractional Reserve Banking.

Fractional Reserve Banking is a banking system which allow banks to hold a fraction their customers' deposit as reserves. The rest not kept as reserves are used to make loans, thereby creating new money.

Central banks announce reserve requirements which banks within the jurisdiction must comply with.