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A bank has $200,000 in deposits and no excess reserves. The reserve ratio is 0.1 and a customer withdraws $10,000. To meet the reserve requirement,
A bank has $200,000 in deposits and no excess reserves. The reserve ratio is 0.1 and a customer withdraws $10,000. To meet the reserve requirement, by how much must the bank increase its reserves?
I don't really understand what the question is asking, the formulas, or where to even start.
(other background info) Suppose the Fed buys $1,000 in bonds from Bank of LaMoney, the reserve requirement is 10%, and the bank holds 10% excess reserves.
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