On a Certain Date the Banking System Had $2 Billion

Multiple Choice

On a certain date the banking system had $2 billion in excess reserves. The legally required reserve ratio was 12.5 percent. Potentially, if these funds were fully loaned out, the banking system as a whole could increase the money supply by a maximum of:

A) ​$0.25 billion.
B) ​$2.5 billion.
C) ​$12.5 billion.
D) ​$16 billion