Question

A check for $5000 drawn on bank a by a depositor and been deposited in bank b. assume that required reserve ratio is 10%. Change in reserves in bank A is:________

Answer 1

Answer: -$500

Explanation:

The required return is the proportion of deposits that banks are supposed to keep with the central bank and in this case it is 10%.

The required reserves from the $5,000 is;

= 10% * 5,000

= $500

If the $5,000 is withdrawn from Bank A, the required reserves will decrease by $500.