If the fed lends five banks an additional total of $100 million but depositors withdraw $50 million and hold it as currency, what happens to reserves and the monetary base? use t-accounts to explain your answer.

The five banks' reserves will increase by $50 million, while the monetary base will increase by $100 million ($50 million in banks and $50 million out with the clients)

Explanation:

The five banks:                                                    

      assets                                 liabilities

reserves +$100 million      Fed's loan +$100 million

reserves -$50 million        clients' deposits -$50 million      

                              net effect

reserves +$50 million       Fed's loan +$100 million

                                          clients' deposits -$50 million

The Fed :

      assets                                 liabilities

loans to 5 banks                 reserves in banks +$50 million

+$100 million

                                            currency +$50 million

                              net effect

loans +$100 million              reserves +$50 million      

                                             currency +$50 million

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i might look it up later.