If the Federal Reserve determined that banks needed to increase the amount of owner's equity,how could this be achieved?
A) Banks would decrease reserves,but borrowings would not change.
B) Banks would increase reserves,but borrowings would increase.
C) Banks would increase reserves,but borrowings would decrease.
D) Banks would decrease reserves,but borrowings would increase.
E) Banks' reserves would not change,but borrowings would increase.

Question

Quizplus · Accepted Answer

Increasing owner's equity means the bank needs to increase their reserves. One way to do this is by decreasing borrowings. Therefore, banks would increase reserves (to increase owner's equity) and decrease borrowings to achieve this goal. Option C is the correct answer as it reflects this relationship.

If the Federal Reserve Determined That Banks Needed to Increase