Economic-checking account problem-help plz thank you?

Question

If a person withdraws $1,000 out of her checking account, the bank

loses reserves and checkable deposits equal to the withdrawal.

loses only checkable deposit liabilities equal to the withdrawal.

gains the ability to increase its loans.

finds that both its assets and its liabilities decline.

a and d

Answer 1

I don't really get what your questions is but if one person withdraws $1000.00 its not going to break the bank. There are systems in place where a bank has so much of their money on reserve with the feds, money out in lending (which earns money for the bank), and even banks have money at other institutions in cd's earning money.

If this is about the recent decline in bank stocks and the whole Indy-Mac issue those places are declining due to sub prime lending (ie all the homes they are forclosing on and losing profits on) and shotty lending practices. Find a good bank with their assests spread out equally and with litte risk assessed and you will be fine.