Fractional Reserve Banking
Definition
Fractional reserve banking is a system where banks are required to keep only a fraction of their deposits as reserves and can lend out the rest.
Related terms
Reserve Ratio: The reserve ratio is the percentage of deposits that banks are required to hold as reserves.
Reserve Requirement: The reserve requirement is the specific amount or percentage set by central banks that banks must hold as reserves against their deposits.
Money Multiplier: The money multiplier refers to the amount by which an initial deposit can multiply through fractional reserve banking.
"Fractional Reserve Banking" appears in:
Study guides (1)
AP Macroeconomics - 4.4 Banking and the Expansion of the Money Supply
Practice Questions (1)
Which of the following is an example of fractional reserve banking?
Are you a college student?
Study guides for the entire semester
200k practice questions
Glossary of 50k key terms - memorize important vocab
About Us
About Fiveable
Blog
Careers
Code of Conduct
Terms of Use
Privacy Policy
CCPA Privacy Policy
Resources
Cram Mode
AP Score Calculators
Study Guides
Practice Quizzes
Glossary
Cram Events
Merch Shop
Crisis Text Line
Help Center
Stay Connected
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.
About Us
About Fiveable
Blog
Careers
Code of Conduct
Terms of Use
Privacy Policy
CCPA Privacy Policy
Resources
Cram Mode
AP Score Calculators
Study Guides
Practice Quizzes
Glossary
Cram Events
Merch Shop
Crisis Text Line
Help Center
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.