Why do banks keep some money in reserve rather than loaning out all of their deposits? Check all that apply.to ensure they have money on hand to loan to wealthy corporationsbecause they are required to by lawbecause they have to meet the withdrawal requests made by customersto ensure that bank runs will take placeto avoid loaning out funds whenever possible
Answer
A
to ensure they have money on hand to loan to wealthy corporations
B
because they are required to by law
C
because they have to meet the withdrawal requests made by customers
D
to ensure that bank runs will take place
E
to avoid loaning out funds whenever possible
Explanation
Banks keep reserves because reserve requirements may require them to hold some deposits rather than lend them all. They also need cash available to meet customers’ withdrawal requests. Reserves are not kept to ensure bank runs or to avoid lending whenever possible, and they are not specifically intended for loans to wealthy corporations.
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