contestada

A commercial bank's ability to create money depends on which of the following?

A. The existence of a central bank
B. A fractional reserve banking system
C. Gold or silver reserves backing up the currency
D. A large national debt
E. The existence of both checking accounts and savings accounts

Respuesta :

A commercial bank's ability to create money depends on a fractional reserve banking system.

What is the fractional reserve system of banking?

The fractional reserve system of banking is when a part of a bank customer's deposits are kepy as reserves while the other part is lent out to those who need.

The amount kept as reserves is dependent on the reserve ratio. The higher the ratio, the lower the ability of bank's to create money.