Excess reserves to increase its lending

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Reference no: EM131195976

Big Bucks Bank currently holds $20 million in excess reserves. If the Fed increases the rate of interest it pays on reserves held at the Fed, we would expect Big Bucks Bank to:

-use those excess reserves to increase its lending.

-hold more of those excess reserves in its reserve account at the Fed, reducing the amount it is willing to lend.

-move a portion of those excess reserves into its required reserve account.

-not change its lending activity, as excess reserves are not eligible to receive interest paid on reserve accounts.

Reference no: EM131195976

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