If Jammie withdraws $1 billion from her checking account at Chase Bank today, will the value...
If Jammie withdraws $1 billion from her checking account at Chase Bank today, will the value of money supply increase or decrease?
Homework Answers
Answer
Yes,
The money supply decreases as the money is taken out of the bank.
The initial decrease in the reserves decreases, but the M1 will be the same, but the decreased reserves decrease the money supply in the banking system.
The decrease in money supply =inital change *(multiplier -1)
as the cash in hand also calculated in the money, so the 1 is deducted from the multiplier.
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