Suppose that the desired reserve ratio is 20 percent and that a bank is just meeting that requirement when $10,000 in cash is withdrawn from a demand deposit.The bank must now

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When $10,000 in cash is withdrawn from a demand deposit, the bank's reserves decrease by $10,000. To maintain the 20% reserve requirement, the bank must increase its reserves by 20% of $10,000, which is $2,000. Therefore, the bank must increase its reserves by $8,000 ($10,000 - $2,000) to meet the reserve requirement again.

Suppose That the Desired Reserve Ratio Is 20 Percent and That