Table 11-3.

-Refer to Table 11-3. If $1,000 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its
A) reserves will increase by $200.
B) liabilities will decrease by $1,000.
C) assets will increase by $1,000.
D) reserves will increase by $800.

Question

Table 11-3.
 
-Refer to Table 11-3. If $1,000 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its
A) reserves will increase by $200. 
B) liabilities will decrease by $1,000. 
C) assets will increase by $1,000. 
D) reserves will increase by $800.

Quizplus · Accepted Answer

When $1,000 is deposited into the First Bank of Fairfield, the bank's liabilities will increase by $1,000, as they owe the depositor that amount. At the same time, the bank's assets will also increase by $1,000, as they now have that amount in cash on hand. The reserves of the bank are not directly impacted by this deposit, as they are determined by the reserve requirement set by the Federal Reserve.

Table 11-3. -Refer to Table 11-3. If $1,000 Is Deposited into the Is