If a bank's desired reserve-deposit ratio is 33% and it has deposit liabilities of $100 million and reserves of $50 million,it
A) has too few reserves and will reduce its lending.
B) has excess reserves and will increase its lending.
C) has the correct amount of reserves and outstanding loans.
D) should increase the amount of its reserves.
E) should decrease the amount of its reserves.

Question

Quizplus · Accepted Answer

The bank's desired reserve-deposit ratio is 33%, meaning it wants to hold $33 million in reserves for $100 million in deposits. With $50 million in reserves, it has excess reserves and can increase lending.

If a Bank's Desired Reserve-Deposit Ratio Is 33% and It