Whenever actual reserves exceed desired reserves, the bank
A)will raise the interest rate on its loans.
B)will borrow funds from another bank.
C)needs to call in loans.
D)will go out of business.
E)can make new loans.

Question

Quizplus · Accepted Answer

When actual reserves exceed desired reserves, it means the bank has excess reserves that can be used to make new loans. This allows the bank to earn more interest income and potentially increase profits. Therefore, the correct choice is E: the bank can make new loans.

Whenever Actual Reserves Exceed Desired Reserves, the Bank