Suppose the banking system as a whole has $600 billion in deposits and $66 billion in reserves, with a reserve ratio of 11 percent. What happens to the stock of money if the Fed lowers reserve requirements by changing the reserve ratio to 10 percent?

Under the revised reserve requirements, banks are required to keep only $60 billion in reserves ($600 billion ? 0.10), giving them $6 billion ($66 billion - $ 60 billion) in excess reserves. Considering a money multiplier of 10, the move would permit an expansion in deposits of $60 billion, which represents a 10 percent increase in the stock of money, from $600 to $660 billion.