Suppose the required reserve ratio is 10%. Mr. Normal uses his ATM card to withdraw $1,000 from this checking account in California National Bank. This action has
A) increased the M1 measure of money supply by $1,000.
B) reduced the bank's required reserves by $1,000.
C) increased the M2 measure of money supply by $1,000.
D) not changed the M1 or M2 measures of money supply.

Question

Quizplus · Accepted Answer

Withdrawing cash from a checking account does not change the overall money supply; it only changes the form of money from deposits to cash, leaving M1 and M2 unchanged.

Suppose the Required Reserve Ratio Is 10