Chapter 15, Problem 5AA

To determine

To choose: The suitable word that best completes the sentence.

Explanation of Solution

The suitable word that best completes the sentence is network.

The banks have to operate according to the reserve requirements given by the Fed. Fed divides the country into12 districts of Federal Reserve; each district has a Fed district bank. These district banks are arranged as a corporation whose owner is the member banks. These district banks have further 25 branch banks. Hence, there is a whole network or a linked system in which banks perform their operations.

Economics Concept Introduction

Introduction:

Fractional reserve banking- The banking system in the United States is based on a fractional reserve banking system. Fed has set some specific reserve requirements for banks since 1913. In this system, a small fraction of the deposits is kept in hand in a bank and the remaining or reserve is available for lending.