Question: Question 2 - Effect of Deposit Increase [4 points]: Through its open market operations, the Federal Reserve recently increased deposits at financial institutions by $80

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 Fed's 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.)

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