South Korea: Bank reserves raised To rein in spending, the Bank of Korea raised the required reserve ratio to 7 percent from 5 percent—the first raise in almost 17 years. With higher required reserves, banks will have to cut the amount of loans they make. Source: The New York Times, November 24, 2006 Explain why the higher required reserve ratio means that banks will have to cut the amount of loans they can make. Part 1 The higher required reserve ratio means that banks will have to cut the amount of loans they can make because ______. A. they have fewer excess reserves with which to make loans B. they make more open market purchases and have less money to loan out to customers C. they are forced to raise interest rates and customers are less likely to borrow money at higher interest rates D. the discount rate rises E. they decrease the amount of currency they hold and increase their deposits at the central bank, so they have less money to loan out to customers
South Korea: Bank reserves raised
To rein in spending, the Bank of Korea raised the
Part 1 The higher required reserve ratio means that banks will have to cut the amount of loans they can make because ______.
A. they have fewer
B. they make more open market purchases and have less money to loan out to customers
C. they are forced to raise interest rates and customers are less likely to borrow money at higher interest rates
D. the discount rate rises
E. they decrease the amount of currency they hold and increase their deposits at the central bank, so they have less money to loan out to customers
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