If we focus on the banking system and assume no change in the public's currency holdings, a loss of reserves by any one bank must:

Question

Quizplus · Accepted Answer

The question assumes no change in the public's currency holdings, which means that there is no inflow or outflow of currency between banks and the public. Therefore, any loss of reserves by one bank can be offset by gains in reserves by other banks in the system. This means that the loss of reserves by one bank does not necessarily equal the loss of reserves by the entire system. It also does not necessarily result in a net loss of reserves for the banking system. The correct answer is C, which states that a loss of reserves by any one bank would result in no change in reserves for the banking system.

If We Focus on the Banking System and Assume No