In a system of 100-percent-reserve banking, the purpose of a bank is to make loans to households. influence the money supply. give depositors a safe place to keep their money. buy and sell gold.

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Business

Clark Rhodes

11 January, 09:32

In a system of 100-percent-reserve banking, the purpose of a bank is to make loans to households. influence the money supply. give depositors a safe place to keep their money. buy and sell gold.

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Elliot Ho · Answer 1

The correct answer is: give depositors a safe place to keep their money.

Explanation:

In a 100-percent-reserve banking system, all of the money deposited is kept as a reserve. The deposits are not further used for the purpose of lending and credit creation.

The purpose of the deposits is not to increase money supply but to simply keep depositors' money in a safe place.

In the old 100 percent reserve system, gold or silver was deposited in the banks and the depositor used to get access to the money worth the value of assets which was provided at a fixed rate.

The money supply does not increase until new assets are discovered.