If the actual reserve-deposit ratio equals 15 per cent and the desired reserve-deposit ratio for this bank is 10 per cent, the bank should:
A)do nothing, because this is a profitable situation
B)stop making loans
C)send the extra reserves to the central bank
D)make more loans in order to earn interest

Question

Quizplus · Accepted Answer

When a bank's actual reserve-deposit ratio is higher than its desired reserve-deposit ratio, it means the bank is holding more reserves than it wants to, relative to its deposits. In this case, the bank can put these excess reserves to work by making more loans, which would earn the bank interest, thereby increasing its profitability. This is why making more loans is the correct action for the bank to take in this scenario.

If the Actual Reserve-Deposit Ratio Equals 15 Per Cent and the Desired