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

By how much must the bank increase its reserves is $9,000.

Required reserves  = 0.10 × $200,000

Required reserves = $20,000

New total deposit  =$200,000 - ($20,000-$10,000)

New total deposit= $200,000 - $10,000

New total deposit= $190,000

Increase in reserve=(0.10 × $190,000)- ($20,000-$10,000)

Increase in reserve=(0.10 × $190,000)-$10,000

Increase in reserve= $19,000 - $10,000

Increase in reserve= $9,000

Inconclusion by how much must the bank increase its reserves is $9,000.

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$9000

Explanation:

Based on the information gotten, the following can be deduced,

The required reserves will be:

= 0.10 × $200,000

= $20,000

When $10,000 is withdrawn, the reserve will be:

= $20,000 - $10,000

= $10.000

Then, the new total deposit will be calculated as:

= $200,000 - $10,000

= $190,0000

The required reserves will then be:

= 0.10 × $190,000

= $19,000

Then the bank will then need to increase its reserve by:

= $19,000 - $10,000

= $9,000

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