Lesson PreviewLesson 8 of 10 in this unit
Part of Financial Sector in AP® Macroeconomics. Read the opening section, then create a free account for the full interactive lesson, practice, and progress tracking.
In a fractional reserve system, banks are required to hold a fraction of their deposits as reserves, allowing them to lend out the majority of deposited funds. This system enables central banks to implement monetary policy effectively by targeting the money supply in the money market.
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