Assume that the required reserve ratio is 20 percent. A business deposits a $50,000 check at Bank A; the check is drawn against Bank B. What happens to the excess reserves at Bank A and Bank B?

Question

Business

Yadira Sutton

17 March, 18:48

Assume that the required reserve ratio is 20 percent. A business deposits a $50,000 check at Bank A; the check is drawn against Bank B. What happens to the excess reserves at Bank A and Bank B?

+4

Answers (1)

Know the Answer?

Chevy · Answer 1

Reserves Increase by $50,000 at Bank A, and decrease by $50,000 at Bank B.

Explanation:

since the business deposited the check at bank A, their reserves increase by the amount the deposited and because the check is drawn against bank B, the reserves at bank B decreases by the check amount.