If the actual reserve-deposit ratio equals 15% for a bank,but the desired reserve-deposit ratio for this bank is 10%,the bank should
A) do nothing because this is a profitable situation.
B) stop making loans.
C) send the extra reserves to the central bank.
D) request that customers withdraw deposits from the bank.
E) make more loans in order to earn interest.

Question

Quizplus · Accepted Answer

The bank has excess reserves since its actual reserve-deposit ratio is higher than the desired ratio. By making more loans, the bank can utilize these excess reserves to earn interest, aligning with its desired reserve-deposit ratio.

If the Actual Reserve-Deposit Ratio Equals 15% for a Bank,but