When a bank obtains a loan from the Fed,it follows that the
A) simple deposit multiplier rises.
B) bank (itself)can create more loans.
C) bank's reserves decrease.
D) bank's reserves remain unchanged.
E) none of the above

Question

Quizplus · Accepted Answer

When a bank obtains a loan from the Federal Reserve, it increases the bank's reserves, allowing it to create more loans based on the fractional reserve banking system. This does not directly affect the simple deposit multiplier, nor does it decrease the bank's reserves.

When a Bank Obtains a Loan from the Fed,it Follows