Question

What would be most likely to happen if the reserve rate were lowered?
O A. Banks would make more loans.
B. Creditors would refuse to pay back loans.
O C. Depositors would make a run on a bank.
D. Banks would stop opening savings accounts.

Answer 1

Answer:

Explanation:

They don't make enough money to make loans to just anyone. Their profit margin is not large enough, and if they make careless loans which default they will loose money that will be harder to replace. Not A.

Banks don't make loans to people who are going to default. Same reason as A. The answer is not B.

Why would depositors do that? If the interest rate goes down the cost of the bond securing the loan will go up. The banks are making more money either way and so in theory are the depositors.

That only leaves D.

Answer 2

The answer is D I think