Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose 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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