A bank takes deposits and uses the funds to make home loans. Hence, the _____ increases.

Question

Quizplus · Accepted Answer

When a bank takes deposits and uses those funds to make home loans, it is essentially converting its liquid reserves into less liquid assets (loans). This action does not inherently increase the bank's level of capital, its Return on Assets (ROA), or the quantity of its reserves. In fact, the quantity of reserves decreases as they are used to fund the loans.

A Bank Takes Deposits and Uses the Funds to Make