Big Bucks Bank currently holds $20 million in reserve balances. If the Fed increases the rate of Interest on reserve balances held at the Fed, we would expect Big
Bucks Bank to
Multiple Choice
use those reserves to increase its consumer lending
not change its lending activity because only nonbanks are eligible to receive interest paid on reserve balances.
use a big portion of those reserves to lend into the money market.
hold even more reserves in its reserve account at the Fed, thereby reducing the amount it is willing to lend.