Answer the Question on the Basis of the Following Information

question 52

Multiple Choice

Answer the question on the basis of the following information about a banking system: new currency deposited in the system = $40 billion;legal reserve ratio = 0.20;excess reserves prior to the currency deposit = $0. Refer to the information.With the $40 billion deposit,the banking system will be able to expand the money supply through loans by:

• A) $160 billion.
• B) $200 billion.
• C) $40 billion.
• D) $128 billion.

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