Are you an economics major? If you have economics training, can you answer these 2 questions?

While Jon is walking to school one morning, a helicopter flying overhead drops a $100 bill. Not knowing how to return it, Jon keeps the money and deposits it in his bank. (No one in this economy holds currency.) If the bank keeps 5 percent of its money in reserves:


a. How much money can the bank now lend out?


b. After this initial transaction, by how much is the money in the economy changed?


c. What’s the money multiplier?


d. How much money will eventually be created by the banking system from Jon’s $100?





You’ve been appointed economic adviser to Examland. The mpe is .6; autonomous investment is $1,000; autonomous gov't spending is $8,000; autonomous consumption is $10,000; and autonomous net exports are $1,000


a. What is the level of income in the country?


b. Autonomous net exports increase by $2,000. What will happen to income?


c. What will happen to unemployment?


d. the mpe changed from .6 to .5. How does this change your answers to a, b, and c

Are you an economics major? If you have economics training, can you answer these 2 questions?
Here is the first part:


a. bank can lend $2000


b. +$2000


c. 20


d. could be infinite, 20x 20x 20x etc