One Reason Why Banks Might Increase Their Reserve-Deposit Ratio Above

question 72

Multiple Choice

One reason why banks might increase their reserve-deposit ratio above the minimum level in times of economic uncertainty is that

• A) banks are initiating quantitative easing
• B) banks may have insufficient required reserves.
• C) banks are most profitable when new loans are issued.
• D) banks may find only limited lending opportunities that seem sufficiently safe.

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Definitions:

Market Outcome

The result of all the buying and selling activities on the market prices, quantities sold, and quantities produced of goods and services.

Domestic Price

The price at which goods and services are sold within a country's borders, as opposed to international or export prices.

Subsidy

A benefit given by the government to groups or individuals, usually in the form of a cash payment or tax reduction, to remove some type of burden and is considered to be in the interest of the public.

Consumers

Individuals or entities that purchase goods or services for personal use and not for manufacturing or resale.