If the banks' desired ratio is 5%, the immediate effect of a $5,000 cheque drawn and cleared against the Zebina bank is to reduce:

Question

Quizplus · Accepted Answer

When a $5,000 cheque is drawn and cleared against the Zebina bank, it directly reduces the bank's deposits by $5,000. Additionally, because the bank's reserves are used to settle the cheque, the reserves also decrease by $5,000. This is a straightforward application of how cheque clearing affects a bank's balance sheet.

If the Banks' Desired Ratio Is 5%, the Immediate Effect