When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank,then
A)the liabilities of the First National Bank increase by $10.
B)the reserves of the First National Bank increase by $ 10.
C)the liabilities of Citibank increase by $10.
D)the assets of Citibank fall by $10.

Question

Quizplus · Accepted Answer

When a check is deposited into an account at a different bank, the bank on which the check is written becomes liable to pay the amount to the other bank. In this case, Citibank becomes liable to pay $10 to the First National Bank of Chicago, thus increasing its liabilities by $10. The reserves and assets of the First National Bank of Chicago and Citibank are not affected by the deposit of the check.

When a $10 Check Written on the First National Bank