A bank's checkable deposits shrinks from $40 million to $33 million. What happens to its required reserves if the required reserve ratio is 3%?

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The required reserves are calculated as a percentage of checkable deposits. A 3% reserve ratio on $40 million is $1.2 million, and on $33 million is $0.99 million. The difference is $0.21 million, approximately $0.2 million.

A Bank's Checkable Deposits Shrinks from $40 Million to $33