All else the same, when the Bank calls in a $100 loan previously extended to the First National Bank, reserves in the banking system ________.

Question

Quizplus · Accepted Answer

When the Bank calls in a $100 loan previously extended to the First National Bank, the reserves of the First National Bank decrease by $100, and since reserves are a part of the banking system's money supply, the overall reserves in the banking system also decrease by the same amount ($100). Therefore, the correct answer is C - decrease by $100.

All Else the Same, When the Bank Calls in a $100