Question

If you decide to hold $\backslash (100$ less cash than usual and therefore deposit $\backslash )100$ more cash in the bank, what effect will this have on checkable deposits in the banking system if the rest of the public keeps its holdings of currency constant?

Short answer

This will lead to an increase in the money supply.

Step-by-step solution

Concept Introduction

A deposit is depicted as an activity of people who place their money in a monetary organization or bank. People ordinarily place their cash at the bank for security and supervision.

Explanation

The deposit of $100 in the bank expands its reserves by $100. This begins the course of numerous deposit extensions, prompting an expansion in the money supply.

Final Answer

As per the circumstance illustrated above, there will be an $\$100$expansion available for later. Through the course of numerous deposit creations, we will see an expansion in the money supply.