Explain the concept of fractional reserve banking and its role in the creation of money in the banking system. A) Fractional reserve banking is a system where banks must maintain reserves equal to their total deposits. B) Fractional reserve banking allows banks to lend a portion of customer deposits, creating new money in the form of loans; this system is regulated by central banks. C) Fractional reserve banking is a system where banks lend out all customer deposits to maximize profitability. D) Fractional reserve banking is a process of creating counterfeit money by banks.

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A: The required reserve ratio (RRR) refers to the proportion of deposits that banks are legally…

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A:

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A: Hi, thanks for the question. Since there are multiple subparts in the questions posted, we will…

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Q: Q. 2 Consider a small economy. Suppose that currency in circulation is $200 million, the amount of…

A: Hi! thanks for the question but as per the guidelines, we answer up to three subparts at one time.…

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A: "Explain how banks create loans and how this process is impacted by the reserve requirement and…

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