One way to increase a bank's amount of required reserves is to
A) decrease deposits.
B) increase loans.
C) increase deposits.
D) decrease loans.
E) decrease owner's equity.

Question

Quizplus · Accepted Answer

When deposits increase, the bank must increase their amount of required reserves in order to meet the reserve requirement set by the Federal Reserve. This is because required reserves are calculated as a percentage of deposits. Thus, increasing deposits would lead to an increase in required reserves.

One Way to Increase a Bank's Amount of Required Reserves