Suppose a bank has excess reserves of $50 and the reserve ratio is 20%. If Andy deposits $5,000 of cash in his checking account and the bank lends $2,500 to Molly, the money supply...
A. is increased by $7,500
B. is increased by $2,500
C. remains unchanged
D. is decreased by $5,000
B. is increased by $2,500 (same amount as loans)