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Scenario: Money Supply Changes
The reserve requirement is 10% and Jack withdraws $5,000 travel money from his checkable deposit. Assume that banks do not hold any excess reserves and that the public holds no currency, only checkable bank deposits.
-(Scenario: Money Supply Changes) Look at the scenario Money Supply Changes. As a result of the withdrawal, excess reserves _____ by _____.

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The reserve requirement is 10%, so the bank must keep $500 (10% of $5,000) in reserves. The remaining $4,500 was previously excess reserves, which are now decreased by the withdrawal.

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