Mary decides to withdraw $500 out of her checking account. The impact of this transaction on the Banking System's balance sheet will be:
A. To only reduce checkable deposits by $500.
B. To increase reserves and reduce checkable deposits by $500 respectively.
C. To decrease reserves and checkable deposits by $500 respectively.
D. To only reduce reserves by the required reserve rate times $500.
Answer:C
Mary decides to withdraw $500 out of her checking account. The impact of this transaction on the Banking System's balance sheet will be:
A. To only reduce checkable deposits by $500. B. To increase reserves and reduce checkable deposits by $500 respectively. C. To decrease reserves and checkable deposits by $500 respectively. D. To only reduce reserves by the required reserve rate times $500.