Question

If banks are currently holding zero excess reserves and the Fed raises the required-reserve ratio, which of the following will happen?

a) Banks will have a reserve deficiency and will look to sell assets or securities to raise cash (reserves).

b) Banks will have positive excess reserves.

c) Banks will begin to extend more credit.

d) Banks will extend more loans.

e) b and d.

Answer 1

e

Step-by-step explanation:

banks are currently holding zero excess reserves and the Fed raises the required-reserve ratio because Banks will have positive excess reserves and Banks will extend more loans.