• 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
  • Stacey Warren - Expert
Hey! We 've verified this expert answer for you, click below to unlock the details :)
At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti atque corrupti quos dolores et quas molestias excepturi sint occaecati cupiditate non provident, similique sunt in culpa qui officia deserunt mollitia animi, id est laborum et dolorum fuga. Et harum quidem rerum facilis est et expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi optio cumque nihil impedit quo minus id quod maxime placeat facere possimus, omnis voluptas assumenda est, omnis dolor repellendus. Itaque earum rerum hic tenetur a sapiente delectus, ut aut reiciendis voluptatibus maiores alias consequatur aut perferendis doloribus asperiores repellat.
  • schrodinger
I got my questions answered at in under 10 minutes. Go to now for free help!
  • 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).

Looking for something else?

Not the answer you are looking for? Search for more explanations.