-The effect of a decrease in excess reserves on interest rates and the amount of loans made is shown by the movement from:
A) D1 to D2 in Figure A.
B) D1 to D2 in Figure B.
C) S1 to S2 in Figure C.
D) S1 to S2 in Figure D.

Question

-The effect of a decrease in excess reserves on interest rates and the amount of loans made is shown by the movement from:
A) D1 to D2 in Figure A. 
B) D1 to D2 in Figure B. 
C) S1 to S2 in Figure C. 
D) S1 to S2 in Figure D.

Quizplus · Accepted Answer

A decrease in excess reserves typically leads to a decrease in the supply of loans, which is represented by a leftward shift in the supply curve (S1 to S2) in Figure D, resulting in higher interest rates and fewer loans made.

-The Effect of a Decrease in Excess Reserves on Interest