Multiple Choice
Suppose you withdraw $1,000 from your checking account. If the reserve requirement is 20 percent, how does this transaction affect the supply of money and the excess reserves of your bank?
A) There is no change in the supply of money; your bank's excess reserves are reduced by $800.
B) There is no change in the supply of money; your bank's excess reserves are reduced by $200.
C) The money supply increases by $1,000, and the excess reserves of your bank are reduced by $800.
D) The money supply increases by $1,000, and the excess reserves of your bank are reduced by $200.
Correct Answer:
Verified
Correct Answer:
Verified
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