suppose that you are a bank manager and the federal reserve raises the required
ID: 1219620 • Letter: S
Question
suppose that you are a bank manager and the federal reserve raises the required reserve ratio from 10 percent to 12 percent. What actions would you need to take? A. You would need to make loans to match the new reserve requirment. B. you would have to reduce loans to make up for the necessary increase in reserves. C. you would have to charge less for your loans because rates are now at 12% D. None of the above.
As your action and those of other bank managers reduced the amount of loans made, we would expect that the money supply would end up {_______ } -( increasing, or Decreasing or remain the same)?
Explanation / Answer
suppose that you are a bank manager and the federal reserve raises the required reserve ratio from 10 percent to 12 percent.then I would have reduce the loans to make up for the necessary increase in reserves.
Required Reserve Ratio is banking relulation that sets the minimum fraction of customer deposits and notes that each commercial bank must hold asreserves (rather than lend out). When required reserve ratio increases by the Federal Reserve then banks need to hold more reserves in their hand.
As your action and those of other bank managers reduced the amount of loans made, we would expect that the money supply would end up decreasing. Because people will not allowed to take loan highly.
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