People hold $200 million of bank deposits but no currency. Banks have made $180 million dollars of loans and only hold enough reserves to satisfy reserve requirements. Because of uncertainty, banks choose to hold $10 million more in reserves, meaning that they now have $10 million in excess reserves plus their required reserves. The Fed takes no action. What happens to bank loans?
a. they fall by $200 million
b. they fall by $100 million
c. they rise by $100 million
d. they rise by $200 million

Answer rating: 100% (QA)

Initially Total assets Deposits Total reserves ... View the full answer