1) If a bank receives a $100 deposit and $400 is created, what is the reserve ratio? 2) If TD Bank holds aside $10 million in required reserves and the Fed has a 20% reserve ratio, how much does TD Bank have in checkable deposits? Solution 1) Money multiplier=increase in money supply/increase in bank deposit=400/100=4 And money multiplier=1/r=4 Thus r=1/4=0.25 Thus reserve ratio is 25% 2) when 20% reserve ratio is $10 million. Then total checkable deposit will be 5 times of reserves=5*10=$50million.