Answer: $50,000
Explanation:
Reserve Requirement = 5% = 0.05
Change in reserves = $2500
The change in deposits is denoted as
= (1/rr) × change in reserves
where,
rr = reserve requirements
Change in deposits will now be:
= (1/rr) × change in reserves
= 1/0.05 × 2500
= 20 × 2500
= $50,000
Therefore, the maximum possible increase in the money supply as a result of your bank deposit will be $50,000.
