📚 Learning Guide
Bank Reserve Management
easy

Which of the following actions can a bank take to ensure it meets its required reserve ratios? Select all that apply.

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Learning Path

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Choose the Best Answer

A

Call in loans from borrowers

B

Increase interest rates on savings accounts

C

Borrow from other banks

D

Purchase government securities

E

Reduce the amount of checkable deposits

Understanding the Answer

Let's break down why this is correct

Answer

To meet its required reserve ratios, a bank can take several actions. One important step is to hold a certain percentage of its deposits in reserve, which means keeping that money available and not lending it out. For example, if a bank has $1 million in deposits and the reserve requirement is 10%, it must keep $100,000 in reserve. Additionally, the bank can borrow from other banks or the central bank if it needs more reserves quickly. By managing its deposits and reserves carefully, the bank ensures it meets the legal requirements and maintains financial stability.

Detailed Explanation

None of the options listed are correct actions for meeting reserve ratios. Other options are incorrect because Calling in loans means asking borrowers to pay back money sooner; Increasing interest rates on savings accounts might attract more deposits, but it doesn't directly affect reserve ratios.

Key Concepts

Bank Reserve Management
Liquidity Management
Monetary Policy
Topic

Bank Reserve Management

Difficulty

easy level question

Cognitive Level

understand

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