At this point the two banks together have created additional demand deposits of
A) $8,750.
B) $10,000.
C) $17,500.
D) $70,000.
E) $80,000.

Question

Quizplus · Accepted Answer

The initial deposit of $10,000 creates $8,750 in new demand deposits. The subsequent loan of $7,500 creates an additional $7,500 in new demand deposits. Thus, the two banks together have created $8,750 + $7,500 = $16,250 in new demand deposits.

At This Point the Two Banks Together Have Created Additional