If the Fed credits Alex's checking account with $8,000 and Alex's bank decides to keep the entire $8,000 in the form of reserves instead of lending it out, how much does the money supply increase?
A) $0
B) $1,000
C) $8,000
D) $64,000

Question

Quizplus · Accepted Answer

The money supply increases by the amount credited to Alex's account, which is $8,000, because the bank is not lending it out to create additional money through the money multiplier effect.

If the Fed Credits Alex's Checking Account with $8,000 and Alex's