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Part $1$

An article in the Wall Street Journal in $2017$ noted$$ that:

$"$China now has one of the highest$[$required reserve$]$ ratios in the$$ world, economists$$ say, even though many businesses are starved of$$ credit..."

$$Source: Lingling$$ Wei, "China's$$ Trillion$-$Dollar Yuan Defense Puts Growth at$$ Risk," Wall Street

Journal$,$

April$13,2017.$

What does the article mean by Chinese businesses being starved for$$ credit?

A$.$

When Chinese businesses are starved of$$ credit, it means they are not profitable.

B$.$

Being starved for credit means that Chinese businesses are holding excess cash.

C$.$

This would indicate that Chinese businesses must pay high interest rates on their loans.

D$.$

Being starved for credit means Chinese businesses cannot get loans.

Part $2$

Is there a connection between the Chinese central bank imposing a higher required reserve ratio on banks and Chinese businesses being starved for$$ credit? Briefly explain.

A$.$

$$Yes$,$ higher required reserve ratios require banks to keep more capital as reserves instead of making loans.

B$.$

$$No$,$ this would indicate that Chinese banks must store more reserves at the central bank instead of the vault.

C$.$

$$No$,$ this would indicate that Chinese banks are making more loans to households instead of businesses.

D$.$

Probably$$ not, since there is no correlation between$$ banks' willingness to make loans and the required reserve ratio.