DSE 13-26

Initially, a banking system has an excess reserve of $160 million and the public holds $200 million cash. The balance sheet of the banking system is as follows:

Suppose $100 million is withdrawn from the banking system and held as cash by the public. What will the money supply be if the banks lend out all excess reserves?

A. $1 500 million

B. $1 700 million

C. $1 800 million

D. $2 300 million