what would be "most" likely to happen if the reserve rate was raised?
A. Banks would stop opening savings accounts
B. Banks would make fewer loans
C. Depositors would make a run on a bank
D. Creditors would refuse to pay back loans

Question

what would be "most" likely to happen if the reserve rate was raised?
A. Banks would stop opening savings accounts
B. Banks would make fewer loans
C. Depositors would make a run on a bank
D. Creditors would refuse to pay back loans

anonymous · Answer

As the cash reserve ratio is increased, the amount of money flowing free in the economy will decrease as a result of banks having to hold larger percentage of their wealth as deposits. Hence, they would be making fewer loans i.e. the amount of money being circulated in the economy will reduce. 

The answer should therefore be (b).