Suppose The United Bank of Glassen has loaned 250 to Mr. Joseph Langdon for his business. Mr. Langdon repays the loan with a check written against his own bank, Rexan Bank. Which of the following is likely to happen as a result of this transaction?
a. The reserves at the United Bank of Glassen will fall.
b. The reserves at Rexan Bank will increase.
c. Checkable deposits at Rexan Bank will increase.
d. Rexan Bank will make more loans than before.
e. The reserves and checkable deposits of Rexan Bank will decrease.
Question 2
If the marginal propensity to consume (MPC) is 4/5, the value of the simple multiplier is:
a. 4.
b. 1/5.
c. 4/5.
d. 5/4.
e. 5.
Joseph Banks
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