When a bank grants a loan to a customer who then keeps the funds in her checking account at that bank, the bank's
A) actual reserves will increase.
B) required reserves will increase.
C) actual reserves will decrease.
D) excess reserves will stay the same.

Question

Quizplus · Accepted Answer

When a bank grants a loan, it must also keep a certain amount of reserves on hand (required reserves) as mandated by the Federal Reserve. By loaning money and keeping the funds in the customer's checking account, the bank's required reserves increase, since the loaned funds are still considered a liability of the bank.

When a Bank Grants a Loan to a Customer Who