Suppose a bank with a 25% reserve requirement has $50 million in reserves and $200 million in checkable deposits, and one of the bank’s depositors, a major corporation, writes a check to another...

Suppose a bank with a 25% reserve requirement has $50 million in reserves and $200 million in checkable deposits, and one of the bank’s depositors, a major corporation, writes a check to another corporation for $5 million. The check is deposited in another bank.

. Explain how the withdrawal affects the bank’s reserves and checkable deposits.

a. By how much will the bank have to reduce its lending?