Allen deposits $2,000 in his local bank earning 2 percent interest annually on his deposit. Jessica borrows $1,000 from the same bank and is charged an annual 7 percent interest rate. How do these two practices affect the money supply in the community?

In Jessica's case, but not Allen's, the money supply decreases.

In Allen's case, but not Jessica's, the money supply decreases.

In both Allen and Jessica's cases, the money supply increases.

In neither Jessica nor Allen's cases does the money supply increase.

Question

Liam Mclean

27 December, 15:29

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Answers (1)

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Azul Campos · Answer 1

A. In Jessica's case, but not Allen's, the money supply decreases.