Banks prefer to make loans than keep reserves because they earn interest on loans but not reserves?

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True of False?

2006-12-10 06:53:16 · 2 answers · asked by youthebest 2 in Social Science ➔ Economics

True, banks try to keep as little reserves as possible, usually no more than the required reserve ratio which is 10%.

2006-12-10 06:57:37 · answer #1 · answered by Ravensman04 3 · 0⤊ 0⤋

Not exactly. Reserves are held in treasury bills or some such interest-bearing security. The point is that they earn MORE interest on loans.

2006-12-10 16:11:04 · answer #2 · answered by MBK 7 · 0⤊ 0⤋