The largest amount by which the money supply can be increased is $1363.5
Explanation:
Checking/Demand Deposit = $150 (which is assumed to be the part of new money supply)
Required reserve ratio = 11%
= 0.11
We, money multiplier = 1 ÷ m
where,
m = Demand deposits ÷ Required reserves
= 0.09
Money multiplier = 1 ÷ 0.11
Money multiplier = 9.09
So, for $150 deposited the money supply will increase by:
= $(150 × 9.09)
= $1363.5
Therefore, the largest amount by which the money supply can be increased is $1363.5
