Question

Someone please help PLESS

Allen deposits $2,000 in his local bank. He earns 2 percent interest each year on his deposit. Jessica borrows $1,000 from the same bank. She is charged a 7 percent interest rate on the borrowed money. How do these bank practices affect the money supply in the community?

A) In Allen's case, but not Jessica's, the money supply decreases.
B) In both Allen's and Jessica's cases, the money supply decreases.
C) In Jessica's case, but not Allen's, the money supply stays the same.
D) In neither Jessica's nor Allen's case does the money supply increase.

Answer 1

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

Jessica completed the task of withdrawing funds from the bank, through borrowing. Allen made a monetary deposit adding to the bank's availability of funds. These funds are often borrowed by other patrons in who borrow money from the bank-as Jessica did.

Step-by-step explanation: