The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely:
A. keep track of whether money is flowing in or out of the bank.
B. buy bonds to increase the size of its reserve assets.
C. reduce the quantity of money and loans on the balance sheet.
D. borrow for the short term from the central bank.
Answer:D
The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely:
A. keep track of whether money is flowing in or out of the bank. B. buy bonds to increase the size of its reserve assets. C. reduce the quantity of money and loans on the balance sheet. D. borrow for the short term from the central bank.
Explanation: Type: Multiple Choice