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Final answer:
Fractional reserve banking involves banks keeping only a fraction of total deposits as cash on hand while lending out the rest, enabling credit expansion but risking bank runs if confidence is lost.
Explanation:
Fractional reserve banking system is a banking system in which banks keep only a fraction of total deposits as cash on hand to meet withdrawal demands while lending out the rest of the deposits as loans. This practice allows banks to create credit and expand the money supply, but also poses the risk of bank runs if depositors lose confidence in the bank's ability to meet withdrawals.
Learn more about Fractional reserve banking here:
https://brainly.com/question/32926117
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