Question

If you decide to hold​ $100 less cash than usual and therefore deposit​ $100 more cash in the​ bank, what effect will this have on checkable deposits in the banking system if the rest of the public keeps its holdings of currency​ constant? Assume the required reserve ratio is​ 10% and banks do not hold any excess reserves. A. Checkable deposits fall by​ $100. B. Checkable deposits increase by​ $100. C. Checkable deposits fall by​ $1,000. D. Checkable deposits increase by​ $1,000. E. Checkable deposits do not change.

Answer 1

Answer:

D. Checkable deposits increase by $1,000.

Explanation:

(1/.10) * 100 = $1,000