Suppose Bill Gates deposits 20 million into his checking account ...

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Suppose Bill Gates deposits 20 million into his checking account at Wells Fargo Bank. If the required reserve ratio is 10 percent, what is the maximum change in money supply?
 
  A) -200 million
  B) -180 million
  C) 2 million
  D) 180 million
  E) 200 million

Question 2

Ceteris paribus, how does a recession in the United States affect U.S. net exports?
 
  What will be an ideal response?

[Benayers]

Answer to Question 1

D

Answer to Question 2

As GDP decreases in the United States due to the recession, the incomes of households fall. Households respond by lowering their purchases of goods and services. Some of the decline in purchases includes domestic goods and services; some of the decline includes foreign produced goods and services. This essentially lowers imports. Assuming that exports do not change, net exports will rise.

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Excellent

[vickybb89]

Thanks for the timely response, appreciate it