anonymous
  • anonymous
what would be "most" likely to happen if the reserve rate was raised? A. Banks would stop opening savings accounts B. Banks would make fewer loans C. Depositors would make a run on a bank D. Creditors would refuse to pay back loans
Economics - Financial Markets
katieb
  • katieb
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anonymous
  • anonymous
As the cash reserve ratio is increased, the amount of money flowing free in the economy will decrease as a result of banks having to hold larger percentage of their wealth as deposits. Hence, they would be making fewer loans i.e. the amount of money being circulated in the economy will reduce. The answer should therefore be (b).

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