Comments on: match the #s with letters? http://aspenfinancialgroup.com/match-the-s-with-letters.htm Fri, 21 Oct 2011 00:09:40 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Dilettante http://aspenfinancialgroup.com/match-the-s-with-letters.htm/comment-page-1#comment-1318 Dilettante Thu, 27 Aug 2009 14:25:11 +0000 http://aspenfinancialgroup.com/match-the-s-with-letters.htm#comment-1318 I'm sure your textbook has all the answers. :) However, I'll tell you this: your guesses are right so far...and I'll give you one of the harder ones. A is #10. Fractional reserve simply means that they keep (e.g. reserve) a percentage (fraction) of the money you deposit, then loan out the remainder. They make the assumption that customers won't ask for more than a small amount of their money at any one time, and earn money from the interest paid by loaning out the rest. In fact, that's why they pay you interest - as a fee for loaning out your money. :) Most banks today have moved away from a fractional reserve into a sort of floating reserve, though... I’m sure your textbook has all the answers. :)

However, I’ll tell you this: your guesses are right so far…and I’ll give you one of the harder ones. A is #10. Fractional reserve simply means that they keep (e.g. reserve) a percentage (fraction) of the money you deposit, then loan out the remainder. They make the assumption that customers won’t ask for more than a small amount of their money at any one time, and earn money from the interest paid by loaning out the rest. In fact, that’s why they pay you interest – as a fee for loaning out your money. :)

Most banks today have moved away from a fractional reserve into a sort of floating reserve, though…

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