Which of the following statements is true about most depository banks?
Choose 1 answer:
(A) They use a full reserve system.
(B) They accept deposits but do not make loans.
(C) Their operations focus exclusively on facilitating the buying and selling of financial assets.
(D) They conduct monetary policy and ensure the smooth operation of the banking system.
(E) They use a fractional reserve system.

Question

Accepted Answer

∻Solution by Steps∻ ‖ step 1 ⋮ Identify the typical operations of depository banks. ‖ ‖ step 2 ⋮ Evaluate the statements given in the image text against the known operations of depository banks. ‖ ‖ step 3 ⋮ Recognize that most depository banks operate on a fractional reserve system, which means they keep a fraction of deposits as reserves and use the rest for loans and other investments. ‖ ∻Answer∻ ***E*** ∻Key Concept∻ ⚹Fractional Reserve Banking⚹ ∻Explanation∻ ⚹Depository banks typically operate on a fractional reserve system, where they hold a portion of deposits in reserve and use the remainder for making loans and other financial activities.◊What is the probability that a randomly selected depository bank uses a fractional reserve system, based on the information provided?⍭ Generate me a similar question◊⚹

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