If banks borrow from the Fed, the banking system's reserves will increase, but if banks borrow from one another,
the banking system's reserves will not change.

Question

Quizplus · Accepted Answer

When banks borrow from the Federal Reserve, new reserves are created, increasing the total reserves in the banking system. However, when banks borrow from one another, they are merely transferring existing reserves, so the total reserves in the banking system remain unchanged.

If Banks Borrow from the Fed, the Banking System's Reserves