Asked by Austin Collins on Apr 29, 2024
Verified
Under a fractional-reserve banking system, the money supply cannot change without any action from the Federal Reserve.
Fractional-reserve Banking
A banking system where banks hold only a fraction of their deposits in reserve, lending the rest to generate profits.
Money Supply
The collective volume of monetary assets within an economy at a certain point, including cash, coins, and balances in checking and savings accounts.
- Gain insight into the underlying principles of fractional-reserve banking and its impact on the circulation of money.
Verified Answer
BA
Btoul AllouMay 06, 2024
Final Answer :
False
Explanation :
In a fractional-reserve banking system, banks can create money through the lending process independently of actions by the Federal Reserve, thus changing the money supply.
Learning Objectives
- Gain insight into the underlying principles of fractional-reserve banking and its impact on the circulation of money.