Increasing bank reserve requirements typically results in what effect on loans?

Increasing bank reserve requirements means that banks are required to hold a higher percentage of their deposits in reserve and not lend them out. When this requirement is raised, banks have less money available to lend to consumers and businesses. As a result, the amount of money circulating in the economy decreases, which typically leads to a reduction in the availability of loans.

With fewer available funds, banks may become more selective about whom they lend to, making it harder for individuals and businesses to obtain loans. This tightening of lending standards can result in higher interest rates for borrowers or outright denial of loan applications, as banks seek to manage their risks and ensure they maintain sufficient reserves. Therefore, the correct answer reflects that increasing reserve requirements generally makes loans harder to obtain.