At One Time, the Country of Freedonia Had No Banks

question 113

Multiple Choice

At one time, the country of Freedonia had no banks, but had currency of $40 million. Then a banking system was established with a reserve requirement of one-third. The people of Freedonia now keep half their money in the form of currency and half in the form of bank deposits. If banks do not hold excess reserves, how much currency do the people of Freedonia now hold?

• A) $13.33 million
• B) $20 million
• C) $33.34 million
• D) $36.36 million