introduction to macroeconomics

Question

suppose you are a bank manager. Your bank has a required reserve ratio of 10% on demand deposits; initially, you have 10 million in loans on your balance sheet, and exactly 1,000,000 in demand deposits. A customer comes in with a request for a loan of $500,000. What will happen to your reserve ratio if you make the loan and then the borrower immediately uses the proceeds to make a payment to another bank? How could you bring your ratio of reserves to deposit back to the required ratio?

Answer 1

This question is asking what would happen if you loaned out half a million of your demand deposits, which was originally at 1 million dollars. In this case sense you are loaning out half the demand deposits, the reserve ratio would be cut in half. You would have to again increase the demand deposits by $500,000 with future loan payments to bring your reserve ratio back to .1 It's unclear what would happen when the individual deposited the money to another bank but their loan balance would decrease.