If Matt Taylor gets his $800 loan from the Paris First National Bank in cash rather than in the form of a new checkable deposit, the:
A) Paris First National Bank will get $800 in new reserves.
B) Paris First National Bank will not get $800 in new reserves.
C) assets of the Paris First National Bank will increase by $800.
D) assets of the Paris First National Bank will decease by $88.

Question

Quizplus · Accepted Answer

When Matt Taylor gets his loan in cash, there is no change in the bank's reserves. Reserves only increase when banks receive deposits, not when they give out cash. Therefore, option B is correct. Option A is incorrect because there is no increase in reserves. Option C is incorrect because the bank's assets do not increase when they give out cash. Option D is incorrect because there is no reason for the bank's assets to decrease.

If Matt Taylor Gets His $800 Loan from the Paris