2. For every question, please write down each main step before you obtain the final answer. Correct final answer with incorrect related work (calculation) or without any work may receive 0 point. On the contrary, incorrect final answer with correct related work (calculation) will receive partial credits.

Question 2 Effect of Deposit Increase [4 points]: Through its open market operations, the Federal Reserve recently increased deposits at financial institutions by $80 billion. If the reserve requirement for all deposits is 8 percent, what is the maximum effect that the Feds actions can have on total deposits? (Hint: You first need to figure out the change in excess reserve, given the $80 billion increase in deposits at financial institutions.)