Final answer:
India has the largest money multiplier due to its lowest reserve requirement, meaning that for each increase in reserve, India's money supply can potentially increase the most. If each country increases reserves by $5000, the money supply increase will be largest in India, followed by Egypt, and then China.
Step-by-step explanation:
The money multiplier is an economic concept that quantifies how much the money supply in an economy can increase based on the reserve requirement set by a central bank. The formula to calculate the multiplier is 1 divided by the reserve ratio. In the context of the question, the reserve requirement is the percentage of total deposits that a bank is required to hold and not lend out.
Given the reserve ratios of China (18.50%), Egypt (10.00%), and India (4.00%), we can calculate their respective money multipliers as follows:
China: 1 / 0.1850 = 5.41
Egypt: 1 / 0.1000 = 10.00
India: 1 / 0.0400 = 25.00
India has the largest money multiplier because it has the lowest reserve requirement. An increase in reserves of $5000 means that India can potentially increase its money supply by $5000 x 25 = $125,000, Egypt by $5000 x 10 = $50,000, and China by $5000 x 5.41 = $27,050, assuming the banking system is able to loan out the maximum amount allowed by the reserve requirements.