When a commercial bank receives a cash deposit,
1) its required reserves increase
2) its required reserves decrease
3) its total reserves increase

Question

When a commercial bank receives a cash deposit,​
1) its required reserves increase
2) its required reserves decrease
3) its total reserves increase

Quizplus · Accepted Answer

When a commercial bank receives a cash deposit, its required reserves increase because it is required by law to keep a certain percentage of deposits on hand as reserves. This also leads to an increase in its total reserves as the cash deposit adds to the bank's vault cash and any balances it holds with the central bank. Therefore, option 1 and 3 are correct. Option 2 and 4 are not correct because there is no decrease in required reserves and no change in excess reserves as a result of the cash deposit.

When a Commercial Bank Receives a Cash Deposit,​

When a Commercial Bank Receives a Cash Deposit,