Suppose the required reserve ratio is 10 percent,and banks hold no excess reserves.If an individual withdraws $20 million from Bank Zip,then the amount of reserves held by Bank Zip will

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The bank must maintain reserves equal to 10 percent of its deposits. When an individual withdraws $20 million, the bank's deposits decrease by that amount, so the required reserves are now $2 million (10 percent of $20 million). However, if the bank held no excess reserves prior to the withdrawal, it must now adjust by reducing its reserves by $2 million, the minimum required amount to maintain the required reserve ratio. Therefore, the amount of reserves held by Bank Zip will decrease by $2 million.

Suppose the Required Reserve Ratio Is 10 Percent,and Banks Hold