Which of the following statements regarding the banks motives for holding reserves is incorrect ? A ) If banks on average expect an increase in policy rates they will be inclined to decrease their reserve holdings. B ) As the opportunity cost of holding reserves increase ,ceteris paribus banks are expected to decreasetheir holdings. C ) Depending on the volatility of fund inflows and outflows banks adjust the amount of their reserve holdings accordingly. D ) Under instable financial conditions banks are inclined to hold higher amounts of reserves compared to normal levels.

Which of the following statements regarding the banks motives for holding reserves is incorrect ? A ) If banks on average expect an increase in policy rates they will be inclined to decrease their reserve holdings. B ) As the opportunity cost of holding reserves increase ,ceteris paribus banks are expected to decreasetheir holdings. C ) Depending on the volatility of fund inflows and outflows banks adjust the amount of their reserve holdings accordingly. D ) Under instable financial conditions banks are inclined to hold higher amounts of reserves compared to normal levels.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 3MCQ

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