Question

If a bank depositor withdraws$\$1000$ of currency from an account, what happens to reserves, checkable deposits, and the monetary base?

Short answer

The monetary base will be unchanged.

Step-by-step solution

Concept Introduction

The monetary base (or M0) is the aggregate sum of cash that is either widely accepted in the possession of the general population or as business bank stores held in the national bank's stores.

Explanation

Total reserves and checking deposits will both reduce by $1,000 while money outside of banks will increment by $1,000. Since money outside of banks ascends by the very sum that concluded reserves decline, the financial base will be unaltered.

Final Answer

Total reserves and checking deposits will both decrease by $\$1000$. The monetary base will be unchanged.