Final answer:
When a bank with a 10% reserve ratio receives a $500 deposit, it will see its total reserves increase by $50. The remaining $450 can be loaned out, potentially multiplying the money supply. If required reserves increase, banks would need to hold more cash, affecting their lending.
Step-by-step explanation:
If the reserve ratio is 10 percent and a bank receives a new deposit of $500, the most likely action the bank will take is: it will initially see its total reserves increase by $500. This is because with a 10% reserve ratio, the bank is required to hold 10% of any deposit as reserves, thus $50 (which is 10% of $500) would be added to the bank's required reserves. The remaining $450 (90% of the deposit) can be used by the bank to make new loans. Moreover, this initiation of credit based on a single deposit could potentially lead to a greater increase in the money supply than the original deposit through the money multiplier effect.
In the event that banks have to increase their required reserves ratio, they may adhere to the new requirements by reducing the amount of loans they can issue or by acquiring additional reserves. For instance, if the required reserve ratio increased from 9% to 10%, a bank would need to hold a greater percentage of its deposits in reserve, which could lead to a reduction in its lending capacity, influencing the overall money supply.