When cash is deposited in a checkable-deposit account at a bank, there is
A) a decrease in the money supply M1.
B) an increase in the money supply M1.
C) an increase in the bank's net worth.
D) an increase in the bank's liabilities.

Question

Quizplus · Accepted Answer

Depositing cash into a checkable-deposit account increases the bank's liabilities because the bank owes this amount to the depositor. The money supply M1, which includes cash and checkable deposits, remains unchanged by such a deposit, and the bank's net worth does not directly increase from the deposit itself.

When Cash Is Deposited in a Checkable-Deposit Account at a Bank