There has been a decrease in investment. As a result, real GDP ...

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There has been a decrease in investment. As a result, real GDP will ________ in the short run, and ________ in the long run.
 
  A) increase; decrease to its initial value B) decrease; decrease further
  C) decrease; increase to its initial level D) increase; increase further

Question 2

Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?
 
  What will be an ideal response?

[Sierray]

Answer to Question 1

C

Answer to Question 2

Banks create money to make a profit. Banks create money when they make loans. The loans take the form of checking account deposits. Asking why banks create money is the same as asking why they make loans.

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Thanks for the timely response, appreciate it

[kusterl]

TYSM