Only One Commercial Bank in the Banking System Has an Excess

Multiple Choice

Only one commercial bank in the banking system has an excess reserve, and its excess reserve is $400,000.This bank makes a new loan of $300,000 and keeps an excess reserve of $100,000.If the required reserve ratio for all banks is 12.5 percent, the potential expansion of the money supply from this new loan is

A) $37,500.
B) $300,000.
C) $2.4 million.
D) $3.2 million.