14
practice examMultiple Choice

Practice Exam

Question 14 • Personal Finance and Economics

What happens when a bank is required to hold more money in reserve?

Answer
A
It has less money for loans.
B
It has less money for withdrawals.
C
It has less money for interest payments.
D
It has less money for operations.

Explanation

Money held in reserve must stay available to meet withdrawal needs or regulatory requirements, so the bank cannot lend it out. If the required reserve increases, the amount available for loans decreases. Therefore, the correct choice is “It has less money for loans.”

AI-written and checked against the verified answer.

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