Banks will hold additional excess reserves when
A)loans to customers look safe and interest rates are high.
B)they anticipate a bank audit.
C)loans to customers look risky and interest rates are low.
D)the economy is booming and there is a large demand for loans.

Question

Quizplus · Accepted Answer

Banks are more likely to hold additional excess reserves when they perceive loans to customers as risky and when interest rates are low. This is because the potential return on loans is not as attractive, and the risk of default is higher, making it safer to hold onto excess reserves.

Banks Will Hold Additional Excess Reserves When