Question

In the AD/AS model, the multiplier magnifies the effect of autonomous spending. for example government spending, on the budget deficits potential GDP tax receipts aggregate demand Question 38 2 pts Scenario 2 Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to Scenario 2. As a result of Kristy's deposit, checking account deposits in the banking system as a whole (including the original deposit) could eventually increase up to a maximum of $10,000. $100,000 $50,000 $8,000.

Answer 1

Q1)option 4) AD

As G rises, then via Multiplier

m = 1/(1-MPS) , effect of Rise in G is multiplied & AD rises by = m*∆G

Q2) option 3) 50,000

Money Multiplier , m = 1/RRR = 1/.2 = 5

Money supply will rise by = m*∆ deposits

= 5*10,000

= 50,000