Use the Following Information for Questions

Multiple Choice

Use the following information for questions
Suppose that the banking industry is competitive and it has zero equity.The effective legal reserve requirement is 25%.Assume that there are three banks, A, B, and C.Bank A initially receives $2,500 in deposits.
-The legal reserve requirement is now changed to 20%.Bank A receives an initial deposit of $2,500.Bank A has excess reserves which will be deposited in Bank B, which in turn, has excess reserves which will be deposited in Bank C.What does Bank C have in excess reserves?

A) $2,000
B) $1,600
C) $1,280
D) $1,000
E) $880