If the required reserve ratio is 10 percent and the Fed buys a $5,000 security from a depository institution, the money supply _____

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When the Fed buys a security from a depository institution, the institution's reserves increase by the purchase price. This allows the institution to lend out more money, which increases the money supply. The required reserve ratio is the percentage of deposits that banks must hold as reserves. In this case, the required reserve ratio is 10%, so the depository institution must hold $500 (10% of $5,000) in reserves. This means that the institution can lend out $4,500, which increases the money supply by $4,500.

If the Required Reserve Ratio Is 10 Percent and the Fed