The change in reserves that the federal reserve must make is $80 billion.
The Federal Reserve System, usually referred to as the Federal Reserve or simply "the Fed," is the nation's central bank. It was created by Congress to give the nation a more stable, flexible, and secure financial and monetary system.
The Federal Reserve is responsible for the secure, flexible, and stable monetary and financial system of the country. The Fed's main duties are to supervise and control banks, carry out national monetary policy, maintain financial stability, and provide banking services.
Reserve requirement = 0.2
Simple money multiplier = 1/Reserve Ratio = 1/0.2 = 5
change in reserves = Increase in total reserves × Simple money multiplier
$400 Billion = Increase in total reserves × 5
Increase in total reserves = $400 billion/ 5
Increase in total reserves = $80 billion
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