Suppose the required reserve ratio is 10 percent, and banks hold no excess reserves. If the Fed purchases $10 million worth of government bonds from Bank INF, the amount of deposits held by the entire banking system will ultimately

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When the Fed purchases $10 million worth of government bonds, the money supply increases because Bank INF now has an additional $10 million in reserves. With a 10 percent reserve requirement, this initial increase in reserves can support up to $100 million in new deposits across the banking system through the money multiplier effect (1/Reserve Requirement = 1/0.10 = 10, so $10 million * 10 = $100 million).

Suppose the Required Reserve Ratio Is 10 Percent, and Banks