In a fractional reserve banking system, banks Group of answer choices have to purchase gold that has the value of the deposits received. must deposit all cash from depositors with the Federal Reserve. can lend all of the deposits that are received. have to deposit all cash from depositors in their own bank vault. face the risk of not having enough cash to meet withdrawal needs.

Fractional-reserve banking is the machine of banking running in nearly all international locations worldwide, below which banks that take deposits from the general public are required to preserve a percentage in their deposit liabilities in liquid belongings as a reserve, and are at liberty to lend the the rest to borrowers.

Bank reserves are held as coins withinside the financial institution or as balances withinside the financial institution's account on the crucial financial institution. The country's crucial financial institution determines the minimal quantity that banks need to preserve in liquid belongings, known as the "reserve requirement" or "reserve ratio". Most industrial banks preserve extra than this minimal quantity as extra reserves.

This lets in them to apply the relaxation of it to make loans and thereby basically create new cash. This offers industrial banks the electricity to immediately have an effect on the cash supply.

Therefore, the Right Option is E. In a fractional reserve banking system, banks face the risk of not having enough cash to meet withdrawal needs.

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