Answer:
increase the money supply by $5 billion
Explanation:
When the Fed carries on an expansionary monetary policy it lowers interest rates and purchases government securities in order to increase the money supply in an attempt to boost economic growth.
The increase in the money supply is determined by the total amount of the open market operations carried out by the Fed ($1 billion) and the money multiplier (= 1/reserve ratio = 1/20% = 5).
Total increase in money supply = $1 billion x 5 = $5 billion
