How does fractional-reserve banking influence the money supply in the United States?

Question

How does fractional-reserve banking influence the money supply in the United States?

Fractional-reserve banks store the entirety of every depositor's funds, limiting the amount of currency in circulation.
Fractional-reserve banks borrow and store funds from lenders, decreasing the number of physical dollars in circulation.
Fractional-reserve banks are permitted to print currency, increasing the number of physical dollars in circulation.
Fractional-reserve banks issue depositor funds to borrowers, increasing the number of claims made on the same dollars.

Answer 1

This process of creating loans and issuing new deposits allows banks to increase the overall money supply in the economy, as the new deposits can then be used to make more loans and create more deposits. This can lead to increased economic growth and investment, but also increases the risk of inflation and financial instability if banks engage in excessive lending or are unable to meet their obligations.