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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Suppose Bank A borrows reserves from Bank B. Now that Bank A has more reserves than previously, will the money supply increase? Explain your answer.

To determine

The changes in the money supply.

Explanation

No, the money supply will not increase. When bank A borrows reserves from bank B, the reserves of bank A increases. However, this leads to a reduction in the reserves of bank B and hence, the reserves in the entire banking system remains unchanged...

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