Thread: Reserve ratio

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.

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.