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Introduction to Fractional Reserve Banking

Gain a better understanding of fractional reserve banking and the strengths and weaknesses of this banking system.

Finances and Banking
Free Course
Fractional reserve banking is a key concept in banking. In this system, banks maintain only a fraction of the total amount of money in all their customers' deposit accounts as cash available for withdrawal. This course will discuss how fractional banking allows to banks free up large supplies of capital that can be loaned out to businesses, thereby helping to expand the economy, and show you how this system is utilized around the world.
  • Duration

    1-2 Hours
  • Assessment

    Yes
  • Certification

    Yes
  • Publisher

    Khan Academy

Description

Modules

Outcome

Certification

View course modules

Description

Fractional banking allows an economy to expand by freeing up capital that can be loaned out to other parties. This course begins by explaining in detail what fractional reserve banking is and teach you how this banking system works. You will first learn the strengths and weaknesses of reserve lending and look at how it helps economies grow. You will then learn about "runs" on banks, which is when all depositors try to withdraw their money at the same time.

Full-reserve banking, also known as 100% reserve banking, is a proposed alternative to fractional-reserve banking. Here, banks would be required to keep the full amount of each depositor's funds in cash and be ready for immediate withdrawal on demand. This course will discuss full reserve banking where you will see how money is accounted for in the balance sheets of banks. You will also learn how banks present information about their key assets and liabilities.

This economics course will give you an in-depth understanding of fractional reserve banking and full reserve banking. You will learn how fractional reserve banking affects the amount of money in circulation, along with the key theoretical perspectives on money circulation. By the end of the course, you will have a clear understanding of why central banks use newly created reserves to buy government debt and how they increase the supply of money to stimulate the economy during a recession. So why wait? Start gaining this fundamental banking knowledge, today.

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Learning Outcomes

Learning outcomes: - Learn what fractions reserve banking is and how it works; - Understand what the main pros and cons of the system are; - Understand what the alternative, namely full reserve banking is; - Know what the different views of money are and how they are calculated; - Learn how banks present information about their key assets and liabilities;

Certification

All Alison courses are free to enrol, study and complete. To successfully complete this Certificate course and become an Alison Graduate, you need to achieve 80% or higher in each course assessment. Once you have completed this Certificate course, you have the option to acquire official Certification, which is a great way to share your achievement with the world. Your Alison Certification is:

Ideal for sharing with potential employers - include it in your CV, professional social media profiles and job applications
An indication of your commitment to continuously learn, upskill and achieve high results
An incentive for you to continue empowering yourself through lifelong learning

Alison offers 3 types of Certification for completed Certificate courses:

Digital Certificate - a downloadable Certificate in PDF format, immediately available to you when you complete your purchase
Certificate - a physical version of your officially branded and security-marked Certificate, posted to you with FREE shipping
Framed Certificate - a physical version of your officially branded and security-marked Certificate in a stylish frame, posted to you with FREE shipping

All Certification is available to purchase through the Alison Shop. For more information on purchasing Alison Certification, please visit our faqs. If you decide not to purchase your Alison Certification, you can still demonstrate your achievement by sharing your Learner Record or Learner Achievement Verification, both of which are accessible from your Dashboard. For more details on our Certification pricing, please visit our Pricing Page.

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