On a Certain Date the Banking System Had $2 Billion

question 113

Multiple Choice

On a certain date the banking system had $2 billion in excess reserves. The legally required reserve ratio was 12.5 percent. Potentially, if these funds were fully loaned out, the banking system as a whole could increase the money supply by a maximum of:

• A)​$0.25 billion.
• B)​$2.5 billion.
• C)​$12.5 billion.
• D)​$16 billion