Suppose That the Desired Reserve Ratio Is 0

Multiple Choice

Suppose that the desired reserve ratio is 0.2, and the Bank of Canada buys $5,000 of Canadian government securities from Bank A.Bank A then lends $4,000 and keeps $1,000 in its vault in cash.In this round of the money-creation process, by what amount has the money supply increased, as measured by M1+?  

A)  by $1,000 
B)  by $4,000 
C)  by $5,000 
D)  by $10,000