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Assume that an individual deposits $100 previously kept at home into her checking account at the local bank.

Which of the following is TRUE?


The money supply will increase by $100 as checking account balances increase.


The money supply will decrease by $100 as there is less circulating cash.


There will be no change in the money supply as a result of this action.


The money supply will only increase if the bank transfers the new reserves to the central bank.

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