Why do banks retain a fractional reserve?
O
A. To invest in the stock market
create a balance sheet
O
c. To loan money to the government
O
D. To satisfy demands for withdrawals
SUE

Because banks hold reserves in amounts that are less than the amounts of their deposit liabilities, and because the deposit liabilities are considered money in their own right, fractional-reserve banking permits the money supply to grow beyond the amount of the underlying base money.