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assume that the required reserve ratio is 20 percent. a business deposits a $50,000 check at bank a; the check is drawn against bank b. what happens to the excess reserves at bank a and bank b? group of answer choices decrease by $50,000 at bank a, and increase by $50,000 at bank b decrease by $10,000 at bank a, and increase by $10,000 at bank b increase by $50,000 at bank a, and decrease by $50,000 at bank b increase by $10,000 at bank a, and decrease by $10,000 at bank b

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C)Reserves increase by $50,000 at Bank A and decrease by $50,000 at Bank B.

Funds that a bank holds back in excess of what is needed by law are known as excess reserves. The Federal Reserve began offering banks interest on this surplus reserves in 2008.

Currently, the fed funds rate and the interest rate on excess reserves are used in conjunction to encourage bank conduct that supports the goals of the Federal Reserve.

Since the check was deposited at bank A, reserves at bank A are increased by the amount of the deposit, and since the check was drawn against bank B, reserves at bank B are decreased by the check amount.

Hence, the correct answer is option c.

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