Which of the following is a chief benefit of a reserve system in banking?

The chief benefit of a reserve system in banking is that it reduces the risk of bank failures. A reserve system requires banks to hold a certain percentage of their deposits in reserve, either in cash or in deposit with the central bank. This practice ensures that banks maintain a buffer of funds to meet withdrawal demands from customers.

By having reserves, banks are better equipped to handle unexpected situations, such as sudden demands for withdrawals or financial crises that might otherwise lead to insolvency. A robust reserve system instills confidence among depositors, reducing the likelihood of bank runs, where a large number of customers withdraw their deposits simultaneously due to fears about a bank's solvency.

This stability enhances the overall health of the banking system, contributing to the confidence of the public in financial institutions and preventing broader economic instabilities that might arise from widespread bank failures. Thus, the reserve system plays a crucial role in promoting financial stability within the economy.