Question

What does a bank do if there are no excess reserves?

• A. Stop Client's transaction
• B. Borrow reserves from other bank
• C. Ask client's to repay loans
• D. Increases lending rate

Hint:

What do banks do when they have no extra money?

Answer 1

The Correct Option is B

When a bank has no excess reserves, it may borrow reserves from other banks to meet its reserve requirements.

Banks typically manage their reserves to ensure they can cover withdrawals and meet regulatory requirements.

Borrowing reserves from other banks is one of the strategies they use in such cases.

Hence, the correct answer is (b).