Which of the Following Best Describes the Chain of Events

question 108

Multiple Choice

Which of the following best describes the chain of events in the money creation process?

• A) Low interest rates discourage people from holding currency. When they deposit the currency, interest rates rise, increasing the quantity of money.
• B) Desired reserves increase, encouraging banks to seek new deposits. When the new depositors come in, desired reserves decrease and the quantity of money increases.
• C) Currency is drained from the quantity of money into the banking system, where it is lent out. The loans are spent, increasing the currency drain and also the quantity of money.
• D) The monetary base increases. Banks acquire excess reserves which they loan out, increasing deposits and also the quantity of money. The new deposits then create additional excess reserves.

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Definitions:

Hostage Taker

An individual who captures and holds others against their will, typically to achieve certain demands or goals.

Fatigued

The state of being very tired either physically or mentally.

Accommodation

A modification or adjustment to a job, environment, or the way things are usually done to enable individuals with disabilities to have equal opportunities.

Psychological Toll

The psychological toll refers to the mental and emotional burden or strain experienced as a result of stressful, traumatic, or challenging situations.