At One Time, the Country of Aquilonia Had No Banks

Multiple Choice

At one time, the country of Aquilonia had no banks, but had currency of $1 million. Then a banking system was established with a reserve requirement of 20 percent. The people of Aquilonia deposited half of their currency into the banking system. If banks do not hold excess reserves, what is Aquilonia's money supply now?

A) $1 million
B) $1.2 million
C) $2.5 million
D) $3 million