A rise in the statutory reserve requirement imposed on commercial banks generally tends to:
Correct answer: B. Reduce their lending capacity
- A. Increase their lending capacity
- B. Reduce their lending capacity
- C. Eliminate government borrowing
- D. Raise export subsidies
Explanation
A higher reserve requirement forces banks to keep a larger share of deposits as reserves, leaving fewer funds available for loans. It is therefore generally a contractionary monetary measure.
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About Economy of Pakistan
Pakistan's economy is examined through agriculture, industry, services, trade, remittances, employment, population, poverty and regional development. The topic also covers GDP and national income, inflation, fiscal and monetary policy, taxation, public debt, the balance of payments, energy constraints and structural challenges, including the role of the State Bank and development planning.
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