Best National Bank operates with a 20 percent required reserve ratio, but has substantial excess reserves. One day a depositor withdraws $500 from his or her checking account at this bank. As a result, the bank's excess reserves:

Question

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When a depositor withdraws $500, the bank's total reserves decrease by $500. Since the bank had excess reserves before the withdrawal, this reduction directly decreases its excess reserves by the same amount, $500.

Best National Bank Operates with a 20 Percent Required Reserve