You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20%. This transaction, by itself, will directly reduce what? so 2000x.20 = 400-2000=1600 so my answer - the quantity of money by 1,600, thanks for checking my answer.
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Originally Posted by kwtolley You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20%. This transaction, by itself, will directly reduce what? so 2000x.20 = 400-2000=1600 so my answer - the quantity of money by 1,600, thanks for checking my answer. That is not the direct effect. The direct effect is to reduce something by .2 x 2000.
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