In a fractional reserve banking system: Group of answer choices banks create money by printing it. banks create money by making

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In a fractional reserve banking system: Group of answer choices banks create money by printing it. banks create money by making

loans. the size of M1 can only be a fraction of checkable deposits. banks are required to hold 100% of deposits as reserves.

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1 answer:

r-ruslan [8.4K] · Answer 1 · 2022-02-09T03:37:13+03:00

Answer:

the size of M1 can only be a fraction of checkable deposits.

Explanation:

fractional reserve banking system requires that a fraction banks receive as deposits from customers be kept as reserves with the central bank and the rest be made out as loans.

M1 consists of coins, demand deposits and currency in circulation. Banks determine the money in circulation by giving out loans. so the size of M1 can only be a fraction of checkable deposits.