Assuming a simple money multiplier, if the Fed increases bank reserves by $100 and the required reserve ratio is 2 percent, then the maximum increase in deposits within the banking system as a whole is

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The maximum increase in deposits is calculated using the money multiplier formula, which is 1/required reserve ratio. With a 2 percent required reserve ratio, the multiplier is 1/0.02 = 50. Therefore, if the Fed increases bank reserves by $100, the maximum increase in deposits is $100 * 50 = $5,000.

Assuming a Simple Money Multiplier, If the Fed Increases Bank