When you deposit $50 in the First National Bank,

Question

Quizplus · Accepted Answer

When you deposit $50 in the First National Bank, the bank's assets increase by $50 because they now hold $50 of your money which is an asset for them. The bank's liabilities do not decrease because they now owe you $50, which is a liability for them. The reserves of the bank do not decrease immediately because they only need to hold a fraction of the deposited amount as reserves, as per reserve requirements.

When You Deposit $50 in the First National Bank