The quantity of reserves supplied increases as interest rates rise because
A)the Treasury borrows more at higher interest rates.
B)consumers don't want to borrow as much so more money is left in banks.
C)as interest rates rise, banks fear losses so they decrease lending.
D)banks find it more profitable to loan out excess reserves to other banks.

Question

Quizplus · Accepted Answer

Banks find it more profitable to loan out excess reserves to other banks as interest rates increase, leading to an increase in the quantity of reserves supplied.

The Quantity of Reserves Supplied Increases as Interest Rates Rise