If banks have zero excess reserves,then the net effect on the money supply of any cheque writing from one commercial bank to another is

Question

Quizplus · Accepted Answer

If banks have zero excess reserves, then when one bank writes a check to another bank, the gain in excess reserves at one bank is offset by a reduction in excess reserves of the same amount at another bank. Therefore, the net effect on the money supply is zero. The desired reserve ratio is not relevant in this scenario as it is assumed that banks have zero excess reserves.

If Banks Have Zero Excess Reserves,then the Net Effect on the Money