Suppose That Banks Desire to Hold No Excess Reserves

question 79

Multiple Choice

Suppose that banks desire to hold no excess reserves.If the reserve requirement is 5 percent and a bank receives a new deposit of $400,it

• A) must increase required reserves by $20.
• B) will initially see reserves increase by $400.
• C) will be able to use this deposit to make new loans amounting to $380.
• D) All of the above are correct.