If, after a deposit outflow, a bank needs an additional $3 million to meet its desired reserves, the bank can ________.

Question

Quizplus · Accepted Answer

The most appropriate option for a bank to acquire the additional $3 million to meet their desired reserves is to sell $3 million worth of securities. This option helps the bank to maintain the existing level of deposits and loans. Repaying advances from the Bank of Canada or reducing deposits by $3 million will lead to a decrease in the bank's reserves, whereas increasing loans by $3 million will lead to a decline in the bank's liquidity.

If, After a Deposit Outflow, a Bank Needs an Additional