A commercial bank has excess reserves of $10,000 and a required reserve ratio of 20 percent. it grants a loan of $8,000 to a customer, who then writes out a check for $8,000 that is deposited in another bank. the first bank will find its reserves decrease by

Question

Business

Bo Moyer

6 March, 14:21

A commercial bank has excess reserves of $10,000 and a required reserve ratio of 20 percent. it grants a loan of $8,000 to a customer, who then writes out a check for $8,000 that is deposited in another bank. the first bank will find its reserves decrease by

+5

Answers (1)

Know the Answer?

Izaiah Simmons · Answer 1

A decrease in the reserves will permit the bank to loan more, by this means increasing the source of money. But since the bank wrote a check for the other bank and deposited an amount of $8000 and also granted a loan of the same amount. There is a decrease of $8000 due to the deposit to the other bank.