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Scenario: Money Supply Changes II
Charlotte withdraws $8,000 from her checkable bank deposit to pay tuition this semester. Assume that the reserve requirement is 20% and that banks do not hold excess reserves.
-(Scenario: Money Supply Changes II) Look at the scenario Money Supply Changes II. As a result of the withdrawal, required reserves:

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The required reserves are calculated as a percentage of total deposits. In this case, the initial deposit was $8,000/0.8 = $10,000. When Charlotte withdraws $8,000, the new deposit is $2,000. The required reserves for this deposit are 20%, which is $400. The initial required reserves were $2,000*0.2 = $400, so the required reserves have decreased by $1,600 ($400 - $2,000).

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