What happens when you withdraw cash from a bank?
A) The bank's reserves are reduced.
B) The bank's reserves are increased.
C) The bank's reserves are not affected.
D) The bank's total reserves remain unchanged but the composition of required reserves and excess reserves change.

Question

Quizplus · Accepted Answer

When a customer withdraws cash from a bank, the bank's reserves are reduced as they need to physically give out the cash. This reduction in reserves can affect the bank's ability to lend or meet reserve requirements set by the central bank.

What Happens When You Withdraw Cash from a Bank