In the simple deposit expansion model,a decline in checkable deposits of $1,000 when the required reserve ratio is equal to 20 percent implies that the Fed

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When the required reserve ratio is 20%, a decline in checkable deposits of $1,000 means the banking system as a whole will have $1,000 less in deposits. To maintain a 20% reserve ratio, banks would need to have held $200 (20% of $1,000) in reserves against these deposits. If the Fed sold $200 in government bonds, it would withdraw $200 from the banking system, aligning with the decrease in reserves needed for the $1,000 decline in deposits.

In the Simple Deposit Expansion Model,a Decline in Checkable Deposits