Suppose a Bank Has $50,000 in Deposits and $6,000 in Reserves

question 136

Multiple Choice

Suppose a bank has $50,000 in deposits and $6,000 in reserves. The required reserve ratio is 10%. Which of the following occurs if the required reserve ratio is increased to 12%?

• A) The bank's total reserves will fall.
• B) The bank will now be fully loaned up.
• C) The bank will have insufficient required reserves.
• D) The bank's profit will fall.

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Definitions:

Business Documents

Written records that provide information and details about business transactions.

Transaction

An agreement between a buyer and a seller to exchange goods, services, or financial instruments.

Evidence

Information or details that provide proof or support for assertions, decisions, or beliefs.

New Account

An account that has been recently opened in the financial books of a business or an individual's newly established account with a financial institution.