$.$ How will the withdrawal initially change the T$-$account of the local bank? Use the accompanying chart to illustrate The changes.

Answer Bank

How does Ryan's withdrawal immediately change the money supply?

The money supply is unchanged. Currency in circulation increases by $$400,$ but checkable deposits decrease by $$400.$

b$.$ If the bank maintains a reserve ratio of $10\%,$ how will it respond to the withdrawal? Complete the passage to correctly describe the bank's response.

$($Assume 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.$)$

In order to reduce the amount of deposits it holds and satisfy the required reserve ratio, the bank will call in loans by an amount equal to

c$.$ If every time the bank decreases its loans, checkable bank deposits fall by the amount of the loan, by how much will the money supply in the economy contract in response to Ryan's withdrawal of $$400?$

Total money supply contraction: $

d$.$ If every time the bank decreases its loans, checkable bank deposits fall by the amount of the loan and the bank maintains a reserve ratio of $20\%,$ by how much will the money supply contract in response to a withdrawal of $$400?$

Total money supply contraction: $