Question

The portion of ________ that a bank does not loan out or spend on securities is...

The portion of ________ that a bank does not loan out or spend on securities is known as ________.

A) loans; reserves

B) deposits; reserves

C) deposits; securities

D) loans; securities

An Explanation for selecting the answer will really help.

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Answer #1

Answer - correct option is B

Reason - The portion of deposits that a bank does not loan out or spend on securities is known as reserves . Actually banks are required only to keep portion of deposits into the reserve and remaining of that can be loan out so that banks are able to create money. Banks actually rely on fractional reserve system of banking wherein whereij bank can only lend out excess of amount of actual deposits and remaining amount doesn't has to be lend out

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