Holding the real money supply constant, an increase in real money demand will reduce interest rates

Assume the marginal propensity to consume (MPC) is 0.80 and the government cuts taxes by $100 billion. The aggregate demand curve will shift to the:

a. right by $80 billion. b. left by $200 billion. c. right by $400 billion. d. left by $400 billion. e. None of these.

Assume a simplified banking system in which all banks are subject to a uniform reserve requirement of 20 percent and checkable deposits are the only form of money. A bank that received a new checkable deposit of $10,000 would be able to extend new loans up to a maximum of:

a. $2,000. b. $8,000. c. $10,000. d. $9,000.