Increase in expected inflation shifts:

When the Fed buys $50 million in bonds, it adds this amount directly to the banking reserves. With a 10% reserve requirement, banks can create up to $500 million in new money through the money multiplier effect (1/RR = 1/0.10 = 10). Thus, the initial purchase leads to a total potential increase in the money supply of $5 billion.

While buying $500 million in bonds would indeed lead to a substantial increase in reserves, it would exceed the target increase of $5 billion in the money supply. The required reserve ratio indicates that this purchase would lead to a money supply increase of $5 trillion, which is far beyond the intended goal.

Purchasing $5 billion in bonds would also greatly exceed the goal of increasing the money supply by $5 billion. This action would drastically inflate the reserves and lead to an excessive increase in the money supply, creating potential inflationary pressures and destabilizing the economy.