Assume that the reserve requirement is 10 percent. If a commercial bank has $2,000 in excess reserves, then the maximum amount by which this bank can increase the money supply is $20,000.

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The maximum amount by which the bank can increase the money supply is $20,000, not $200,000. The money multiplier is 10 (1/0.10), so $2,000 in excess reserves can support $20,000 in new loans.

Assume That the Reserve Requirement Is 10 Percent