Answer :
Answer:
By using deposited money to make loans without reducing the value of the deposits
Explanation:
A P Ex
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The fractional reserve system increases the money supply in a country by making loans with money deposited without decreasing the price of the investments.
What is a fractional reserve system?
A system of banking in which only a small portion of financial assets are supported by available cash and allowed to withdraw is referred to as a fractional reserve system.
It aids in resolving this issue of bank panic when all depositors withdraw their funds at the same time. Bank failures are common in the fractional reserve banking system.
This system of banking focuses on increasing the supply of money in the market by keeping a sufficient amount of cash in hand to fulfill the need for withdrawal.
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