A one-minute video explanation of fractional reserve banking Fractional reserve banking is a system in which only a fraction of bank deposits are backed by actual cash on hand and available for withdrawal.Learn more. As you’ll be able to find out, commercial banks and not central banks create most of the money (some people would prefer using brackets before and after the word) in existence through a mechanism called fractional reserve banking.
Fractional reserve banking may seem complicated but understanding the basics isn’t all that difficult, as you’ll be able to find out.
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