Suppose Students Bank and Trust has zero excess reserves.If the required reserve ratio decreases:

Question

Quizplus · Accepted Answer

If the required reserve ratio decreases, the bank will be required to hold a lower percentage of its deposits as reserves. This means that the bank will have more funds available to lend out, allowing it to make more loans. Since the bank has zero excess reserves, it can only lend out funds up to the amount of its deposits. Therefore, the ability to make more loans is the only option that can occur in this scenario.

Suppose Students Bank and Trust Has Zero Excess Reserves