When cash is deposited in a checkable-deposit account at a bank, there is:
A) A decrease in the money supply M1
B) An increase in the money supply M1
C) An increase in the bank's net worth
D) An increase in the bank's liabilities

Question

Quizplus · Accepted Answer

Depositing cash into a checkable-deposit account increases the bank's liabilities because the bank now owes the depositor the amount of the deposit. The money supply M1 remains unchanged as it includes both cash and checkable deposits.

When Cash Is Deposited in a Checkable-Deposit Account at a Bank