Suppose banks desire to keep 5 percent of all deposits on reserve, and the Fed sells $10 billion of government securities to Bank A. As a result,

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When the Fed sells $10 billion of government securities to Bank A, it reduces Bank A's reserves by $10 billion. With a 5% reserve requirement, banks can lend out 95% of their deposits. The decrease in reserves means banks can support $10 billion less in deposits. Using the money multiplier (1/reserve requirement), which is 1/0.05 = 20, the maximum decrease in deposits is $10 billion * 20 = $200 million.

Suppose Banks Desire to Keep 5 Percent of All Deposits