A customer of Bank A writes a $20,000 check for a new car, which the car dealer deposits in his bank, Bank B. Which of the following statements pertaining to this transaction is most true?
A. Banks A's reserves will decrease by the required reserve rate times $20,000 and Banks B's reserves will increase by (1- required reserve rate) times $20,000.
B. Bank A's reserves decrease by $20,000 and Bank B's reserves increase by $20,000.
C. Neither Bank A's or B's reserves will change.
D. Bank B's reserves will decrease and Bank A's reserves will increase by $20,000.
Answer:B
A customer of Bank A writes a $20,000 check for a new car, which the car dealer deposits in his bank, Bank B. Which of the following statements pertaining to this transaction is most true?
A. Banks A's reserves will decrease by the required reserve rate times $20,000 and Banks B's reserves will increase by (1- required reserve rate) times $20,000. B. Bank A's reserves decrease by $20,000 and Bank B's reserves increase by $20,000. C. Neither Bank A's or B's reserves will change. D. Bank B's reserves will decrease and Bank A's reserves will increase by $20,000.