If the Central Bank of Macroland puts an additional 1,000 dollars of currency into the economy, the public deposits all currency into the banking system, and banks have a desired reserve/deposit ratio of 0.20, then the banks will eventually make new loans totaling ________ and the money supply will increase by ________.
A. $1,000; $5,000
B. $1,000; $1,000
C. $4,000; $4,000
D. $4,000; $5,000
Answer: D
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