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Suppose a banking system has a required reserve ratio of 10 percent. what is the maximum possible increase in the money supply in response to a $2 billion increase in excess reserves for the whole banking system?

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W0lf93
The maximum increase would be equal to the increase in excess reserves multiplied by the reserve ratio. In this case, that would be the $2B excess multiplied by the 10 percent (0.10) that is required in reserves. This would give a maximum money supply increase of $200 million.

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