Bank panics: occur frequently in fractional reserve banking systems. are a risk

Question

Bank panics:

occur frequently in fractional reserve banking systems.

are a risk of fractional reserve banking but are unlikely when banks are highly regulated and lend prudently.

cannot occur in a fractional reserve banking system.

occur more frequently when the monetary system is backed by gold.

2. Assume the Standard Internet Company negotiates a loan for $5,000 from the Metro National Bank and receives a checkable deposit for that amount in exchange for its promissory note (IOU). As a result of this transaction:

a claim has been "demonetized."

the supply of money declines by the amount of the loan.

the supply of money is increased by $5,000.

the Metro Bank acquires reserves from other banks.

Explanation / Answer

1.are a risk of fractional reserve banking but are unlikely when banks are highly regulated and lend prudently.

2.the supply of money is increased by $5,000.

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