Explain how will the bank respond to the withdrawal

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Ryan Cozzens withdraws $400 from his checking account at the local bank and keeps it in his wallet. If the bank maintains a reserve ration of 10%, Explain how will the bank respond to the withdrawal? Suppose that the bank responds to insufficient reserves by reducing the amount of deposits it holds until its level of reserves satisfies its required reserve ratio. The bank reduces its deposits by calling in some of its loans, forcing borrowers to pay back these loans by taking cash from their checking deposits (at the same bank) to make repayment.

Reference no: EM1347135

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