In the Money Channel View of How Changes in the Money

question 73

Multiple Choice

In the money channel view of how changes in the money supply affect output and the real interest rate in the short run,

• A)other financial assets are considered to be poor substitutes for bank loans by many borrowers.
• B)banks are passive intermediaries, meeting the public's demand for money by supplying deposits.
• C)credit crunches have a very important role to play.
• D)interest rates do not necessarily bring the volume of funds desired to be lent by savers into equilibrium with the volume of funds desired to be borrowed by borrowers.

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Definitions:

Call Contract

An options contract that gives the holder the right to buy an underlying asset at a specified price within a certain period.

Write

In finance, this term often refers to the act of selling a derivative contract, such as an option, thus obligating the writer to fulfill the contract terms if exercised.

Profit

Profit is the financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Call Premium

The additional amount that the price of a call option exceeds its intrinsic value, often influenced by time remaining until expiration and volatility.