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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