Question

Why do banks keep some money in reserve rather than loaning out all of their deposits? Check all that apply.

to ensure they have money on hand to loan to wealthy corporations
because they are required to by law
because they have to meet the withdrawal requests made by customers
to ensure that bank runs will take place
to avoid loaning out funds whenever possible

Answer 1

Select:
- because they are required to by law
- because they have to meet the withdrawal requests made by customers

Brief explanation: Banks hold reserves to satisfy legal reserve requirements and to maintain liquidity so they can meet depositor withdrawals and payment obligations. They do not keep reserves to cause bank runs, nor to avoid lending whenever possible; nor are reserves held specifically to lend only to wealthy corporations.