Fractional Reserve
Fractional reserve is the most commonly practised form of banking around the world. It is a banking model of operation that mandates banks to withhold parts of the customers’ deposits as reserves and use another part of it for withdrawals/loans.
The Federal Reserve usually sets the percentage which banks are required to keep as reserves.
The higher the percentage, the less money/assets are allowed into the economy and conversely, the lower the number, the more money is pumped into the economy.
