Answer: $9000
Explanation:
Based on the information gotten, the following can be deduced,
The required reserves will be:
= 0.10 × $200,000
= $20,000
When $10,000 is withdrawn, the reserve will be:
= $20,000 - $10,000
= $10.000
Then, the new total deposit will be calculated as:
= $200,000 - $10,000
= $190,0000
The required reserves will then be:
= 0.10 × $190,000
= $19,000
Then the bank will then need to increase its reserve by:
= $19,000 - $10,000
= $9,000
By how much must the bank increase its reserves is $9,000.
Required reserves = 0.10 × $200,000
Required reserves = $20,000
New total deposit =$200,000 - ($20,000-$10,000)
New total deposit= $200,000 - $10,000
New total deposit= $190,000
Increase in reserve=(0.10 × $190,000)- ($20,000-$10,000)
Increase in reserve=(0.10 × $190,000)-$10,000
Increase in reserve= $19,000 - $10,000
Increase in reserve= $9,000
Inconclusion by how much must the bank increase its reserves is $9,000.
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