If there were an increase in the number of bank failures, we should expect the amount of excess reserves in the banking system to:

Question

Quizplus · Accepted Answer

When there is an increase in the number of bank failures, other banks in the system often become more cautious, holding onto more reserves to protect themselves against potential losses or runs on the bank. This behavior leads to an increase in the amount of excess reserves in the banking system as banks aim to ensure they have enough liquidity to meet any sudden increase in withdrawals.

If There Were an Increase in the Number of Bank