Question

Drawing on her account at Regional Bank, Samantha writes a check to Isabella, who deposits the check in her account at Local Bank. Once the check has cleared, which of the following will occur to the money supply?M1 will increase.
there will be no change in M1.
M1 will decrease.
M2 will increase.

Answer 1

The correct answer is that there will be no trade in M1.

What occurs when a bank is required to preserve extra money in reserve it has less cash for loans?

The reserve ratio is the amount of reserves—or cash deposits—that a financial institution should maintain on to and not lend out. The higher the reserve requirement, the much less money that a financial institution can doubtlessly lend—but this excess money additionally staves off a banking failure and shores up its balance sheet.

What occur when the statutory reserve requirements are lowered by way of bank Negara?

The selection to limit the SRR is undertaken to preserve adequate liquidity in the domestic financial system. This will continue to aid the environment friendly functioning of the home monetary markets and facilitate high quality liquidity administration by using the banking institutions.

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