With a reserve ratio of .5, an increase in deposits of $100 will result in an increase in money of $100.
The reserve ratio and the money supply have an inverse relationship.
This implies that when the reserve ratio decreases, the money supply increases, and vice versa.
Reserve ratio = 0.5 or 50%
Deposit = $100
Total money in the banking system = $200 ($100/0.5)
Increase in money supply = $100 ($200 - $100)
Thus, with a reserve ratio of .5, an increase in deposits of $100 will result in an increase in money of $100.
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