A bank may lend an amount equal to its

NetherCraft 0

true or false each bank may lend an amount equal to
it’s excess reserves and no more. the entire banking system can
increase the value of loans by the amount of excess reserve
multiplier by the money multiplier

Answer

Answer

True the bank may lend an amount equal to it’s
excess reserves and no more because if the loan amount increases
more than the excess reserves the credibility of the bank will fall
and with that the bank will have to bear tremendous losses and it
also have to maintain the reserves to maintain the credibility in
the economy.

Also Check This  what became of the woman whose face “launched a thousand ships”?

True the entire banking system can increase the
value of loans by the amount of excess reserve multiplier by the
money multiplier as when the reserves increases the value of loans
can be increased and when the amount of excess reserve is
multiplied with money multiplier the value of loans increases .


Leave a Reply

Your email address will not be published.