Whenever actual reserves exceed desired reserves, the bank
A) will go out of business.
B) needs to call in loans.
C) can lend out additional funds.
D) must increase the amount of its required reserves by obtaining more cash.

Question

Quizplus · Accepted Answer

When a bank has actual reserves that exceed its desired reserves, it means that it has excess reserves. These excess reserves can be used to increase lending and make additional loans. This can help to stimulate economic activity and generate additional revenue for the bank through interest on the loans. Therefore, the correct answer is C, that the bank can lend out additional funds.

Whenever Actual Reserves Exceed Desired Reserves, the Bank