Timmy withdraws $11,749 from his bank account where the bank has a reserve requirement of 18%. How many dollars did the bank's required reserves drop due to this transaction?

If the answer is $1,234 then use 1234 for your response.

Question

Timmy withdraws $11,749 from his bank account where the bank has a reserve requirement of 18%. How many dollars did the bank's required reserves drop due to this transaction?

If the answer is $1,234 then use 1234 for your response.

BlackTom AI · Accepted Answer

Question restatement: Timmy withdraws $11,749 from his bank account with a reserve requirement of 18%. The task is to determine how many dollars the bank's required reserves drop due to this withdrawal.

Step 1: Understand the relationship. A bank's required reserves are a fraction of its deposits, defined by the reserve requirement. If deposits decrease by a certain amount, the required reserves decrease by the same fraction of that amount.

Step 2: Identify the withdrawal as the change in deposits. The deposit decrease is 11,749 dollars.

Step 3: Apply the reserve requirement. Calculate the drop in required reserves as 18% of 11,749. This is 11,749 × 0.18.

Step 4: Perform the multiplication. 11,749 × 0.18 = 2,114.82.

Step 5: Consider rounding conventions. In dollars, this amount is typically expressed to the nearest cent as 2,114.82. If a whole-dollar amount is required, it could be rounded to 2,115, but the precise calculation yields 2,114.82.

Step 6: Final interpretation. The bank’s required reserves decrease by 2,114.82 dollars (or 2,115 when rounded to the nearest dollar).

ECON 201 Sections 2 & 3, Winter 2025 practice final exam question set

Timmy withdraws $11,749 from his bank account where the bank has a reserve requirement of 18%. How many dollars did the bank's required reserves drop due to this transaction? If the answer is $1,234 then use 1234 for your response.

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