Suppose That the Banking System Has Excess Reserves of $10

Multiple Choice

Suppose that the banking system has excess reserves of $10 million, the desired reserve ratio is 10 percent and the currency drain ratio is 40 percent.By how much will the quantity of money increase?

A) $28 million
B) $50 million
C) $40 million
D) $22 million
E) $12.5 million