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 are likely to raise their ratios of reserves to deposits in order to protect themselves from potential deposit withdrawals and to restore confidence in the banking system. This can also help prevent a further cascade of bank failures.

If Many Banks Fail, This Is Likely To