If the Fed buys $32 billion of U.S.bonds in the open market and the reserve requirement is 10 percent,M1 will eventually

Question

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When the Fed buys bonds in the open market, it increases the reserves of the banking system. With a 10 percent reserve requirement, each dollar of reserves can support $10 of deposits because $1 can be held in reserve while $9 can be loaned out, which then circulates and gets deposited in banks again, allowing for further loans. This process continues until the initial increase in reserves ($32 billion) has created a total increase in the money supply of $320 billion, reflecting a money multiplier effect of 10 (1/0.1 = 10).

If the Fed Buys $32 Billion of U