If a Number of People Suddenly Deposit into Their Checking

Multiple Choice

If a number of people suddenly deposit into their checking accounts a great deal of cash previously kept in their pockets or at home, other things constant, their actions will

A) create excess reserves and place banks in a position to extend additional loans, which will reduce the money supply.
B) create excess reserves and place banks in a position to extend additional loans, which will expand the money supply.
C) lead to higher interest rates.
D) force the Fed to reduce its discount rate.