Creating Folders confusion

We are running v8

I went into a drive and attempted to create a sub-folder of the present folder that I was in. In the attached examples, I was in #G\test01. When I typed in the new folder name, I expected it to create a folder #G\test01\sub-folder01. Instead it created a folder called #G\test01sub-folder01. I repeated this and the same thing happened when I tried to create #G\test01\sub-folder02

Is this the way that "create folder" is designed to work? If so, how might I create a folder beneath #G\test01?

Thanks