Based on historical observations, if many banks fail, this is likely to:
A)cause surviving banks to lower their ratios of reserves to deposits.
B)cause surviving banks to raise their ratios of reserves to deposits.
C)have no effect on the ratio of reserves to deposits in surviving banks.
D)cause surviving banks to hold less currency.

Question

Quizplus · Accepted Answer

When many banks fail, surviving banks tend to raise their ratios of reserves to deposits to protect themselves against potential runs and to maintain liquidity.

Based on Historical Observations, If Many Banks Fail, This Is