First National Bank has zero excess reserves.Ceteris paribus,if the required reserve ratio increases,which of the following will happen immediately?

Question

Quizplus · Accepted Answer

If the required reserve ratio increases, the bank will be required to hold more reserves relative to its deposits. Since the bank has zero excess reserves, it will not have enough required reserves to meet the new requirement. The bank will need to either reduce its loans or find additional sources of reserves to meet the higher requirement.

First National Bank Has Zero Excess Reserves