In Fractional Reserve Banking, how is the money supply increased considering reserves are given away? And how are people who deposit the money able to withdraw their entire deposit when some of it is kept to BE a reserve?

Question

So from what I understand, in Fractional Reserve Banking, whenever money is deposited into a bank, they keep a percentage of that money to give out as loans.
So since they are giving out the reserve, how exactly is the bank making money here?
And since people are able to withdraw their entire deposit…. How can that be the case when some of it is taken for the reserve?

In: Economics

Answer 1

Cash is fungible – they don’t put your cash in a specific box and remove part of it for loaning out. They make money off of loan interest. They lend money out, and are repaid more money over time.

If *everyone* wanted to withdraw everything, it would not be possible.