Assume that the Paris First National Bank currently has deposits of $20 million. If the current required reserve ratio is raised from 20 percent to 40 percent, then:
A. Paris First National Bank must increase its required reserves from $4 million to $8 million.
B. required reserves will decrease from $16 million to $12 million.
C. excess reserves will automatically increase by $20 million.
D. Paris First National Bank must close out 4 million in loans.
Answer: A
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