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Each bank must limit its loans to the amount of its excess reserves because

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Each bank must limit its loans to the amount of its excess reserves because

Each bank must limit its loans to the amount of its excess reserves because
A) loans are less profitable than other investments, such as government securities.
B) additional transactions would tend to reduce the money supply.
C) additional loans would be likely to antagonize rival banks, leading to competition on loan rates.
D) when customers spend the money they have borrowed, the bank is likely to lose reserves to other banks.
E) this limits the possibility of making "bad" loans that will not be repaid.

Textbook

Introduction to Economic Reasoning

Edition: 8^th

Author: Rohlf

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