Suppose you bank at Bank A and you write a check to your friend,who banks at Bank B.After the check clears,_____.

A) both Bank A's and Bank B's assets increase
B) both Bank A's and Bank B's assets decrease
C) Bank A's assets increase and Bank B's assets decrease
D) Bank A's assets decrease and Bank B's assets increase
E) there is an increase in the Federal Reserve's assets

Question

Jean-Didier DARDÉ · Accepted Answer

Final Answer : D, Explanation :  When you write a check to your friend who banks at Bank B, Bank A's assets decrease as it loses the money that was used to write the check. Meanwhile, Bank B's assets increase as it receives the money from Bank A when the check clears. The Federal Reserve's assets are not impacted by this transaction.

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