If Bank A borrows from Bank B,reserves in the banking system __________.If Bank A borrows from the Fed,reserves in the banking system __________.
A) rise; fall
B) fall; remain unchanged
C) remain unchanged; remain unchanged
D) remain unchanged; rise
E) rise; remain unchanged

Question

Quizplus · Accepted Answer

When Bank A borrows from Bank B, the reserves simply shift from one bank to another, leaving the total reserves in the banking system unchanged. However, when Bank A borrows from the Federal Reserve, new reserves are added to the banking system, causing the total reserves to rise.

If Bank a Borrows from Bank B,reserves in the Banking