An increase in the reserve ratio leaves banks with a need and desire to
A) become more liquid.
B) make more loans.
C) purchase real estate.
D) borrow in the federal funds market.

Question

Quizplus · Accepted Answer

Increasing the reserve ratio means banks have to hold more reserves and have less money available to lend out. This makes it necessary for banks to become more liquid by either selling off assets or increasing their deposits by attracting more customers. Therefore, choice A is the best answer. B, C, and D are not relevant or helpful in addressing the issue of an increased reserve ratio.

An Increase in the Reserve Ratio Leaves Banks with a Need