Tom Goldman deposits $1,000 in newly printed birthday cash into his checking account at the bank.How would this be recorded on the bank's balance sheet?

Question

Quizplus · Accepted Answer

When Tom Goldman deposits $1,000 in his checking account, the money supply in the broader economy increases by $1,000. This is because the money is now considered part of the banking system's reserves, which increases the amount of money banks can lend out and ultimately leads to more money creation in the economy. There is no change to the amount of currency in circulation, so options A and C are incorrect. Option D is also incorrect because there is no reason for the money supply to fall again after the deposit is made. Option E is incorrect because there is indeed an initial change to the money supply when the deposit is made.

Tom Goldman Deposits $1,000 in Newly Printed Birthday Cash into His