Unpredictable Shocks to the Financial System

question 15

Multiple Choice

Unpredictable shocks to the financial system

• A) reduce the demand for money.
• B) increase the demand for money.
• C) cause consumers and firms to switch to credit cards.
• D) affect small depositors more so than large depositors.
• E) result in money neutrality.

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Definitions:

Law of Supply

The principle that, other things equal, an increase in the price of a good leads to an increase in the quantity supplied, and vice versa.

Price

The amount of money required to purchase a good or service, representing the value that consumers or buyers are willing to pay.

Good

An item or service that satisfies human wants and provides utility, which can be transferred from one person to another.

Demand Curve

An illustrative chart that demonstrates the link between a product's price and the amount of it consumers want to buy.