Suppose the reserve ratio is 20 percent for all banks. If the Fed increases bank reserves by $200, then the money supply will

Name: Suppose the reserve ratio is 20 percent for all banks. If the Fed increases bank reserves by $200, then the money supply will
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The reserve ratio is 20%, so an increase of $200 in bank reserves can lead to an increase of $1,000 in the money supply using the money multiplier formula: 
1/R = 1/0.20 = 5 
∆MS = 5 x ∆RR = 5 x $200 = $1,000

Suppose the Reserve Ratio Is 20 Percent for All Banks