fractional reserve banking

Definition

A banking system in which only a fraction of the total deposits managed by a bank must be kept in reserve. The amount of the deposits equals the amount of the reserves times the deposit multiplier. In the U.S., this system is maintained by the Federal Reserve Board.

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You should try to get involved in the fractional reserve banking only if you trust that they are a legit bank.

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Because fractional reserve banking was in place, only a fraction of the total deposits had to be kept in the reserve.

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The fractional reserve banking was optimal for the bank who would not have able to store the funds in their small vault.

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fractional interest monetary base