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A commercial bank has excess reserves of $10,000 and a required reserve ratio of 20%. It grants a loan of $8,000 to a customer, who then writes out a check for $8,000 that is deposited in another bank. The first bank will find its reserves decrease by

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Answer:

$8,000

Explanation:

Required reserves= Deposits x Reserve ratio

Required reserves= $10,000 x 20%

= $10,000 x 0.2

= $2,000

Excess reserve=  Total reserve- required reserve

∵ $10,000-$2,000

= $8,000

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