Consider the Following Information About a Banking System: New Currency

Multiple Choice

Consider 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. 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.