If a bank is subject to a reserve requirement of 10% and if its reserve ratio is 33%, then all of these are true EXCEPT that it
A) can make additional loans.
B) has excess reserves.
C) must limit withdrawals.
D) is considered highly liquid.

Question

Quizplus · Accepted Answer

A bank having a reserve ratio of 33% means that it has excess reserves, which it can lend out to customers. Therefore, it does not need to limit withdrawals. However, if there is a rush of withdrawals, the bank may need to borrow additional funds from other banks to meet the sudden demand.

If a Bank Is Subject to a Reserve Requirement of 10