People hold $200 million of bank deposits but no currency. Banks have made $180 million dollars of loans and only hold enough reserves to satisfy reserve requirements. Because of uncertainty, banks choose to hold $10 million more in reserves, meaning that they now have $10 million in excess reserves plus their required reserves. The Fed takes no action. What happens to bank loans? a. they fall by $200 million b. they fall by $100 million c. they rise by $100 million

People hold $200 million of bank deposits but no currency. Banks have made $180 million dollars of loans and only hold enough reserves to satisfy reserve requirements. Because of uncertainty, banks choose to hold $10 million more in reserves, meaning that they now have $10 million in excess reserves plus their required reserves. The Fed takes no action. What happens to bank loans? a. they fall by $200 million b. they fall by $100 million c. they rise by $100 million

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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