The Behavior of the M1 Velocity of Money in Recent

question 30

Multiple Choice

The behavior of the M1 velocity of money in recent years can be explained by:

• A)stability of interest rates.
• B)a low and stable rate of inflation.
• C)monetary policy that has been successful in stabilizing the economy.
• D)financial innovation creating new substitutes for M1 money.
• E)a large number of banks and savings and loan associations going bankrupt.

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Definitions:

Time Deposits

Banking or financial instruments that require the holder to keep the money deposited for a fixed term or period of time, often offering higher interest rates than savings accounts.

Federal Reserve Banks

A system of 12 banks in the United States that serve as the central banking system, responsible for implementing monetary policy, regulating banks, and ensuring the stability of the financial system.

Money Supply

The total amount of monetary assets available in an economy at a specific time, including cash, bank deposits, and liquid assets held by the public.

Excess Reserves

The amount of reserves that a bank holds beyond the required minimum, often held in excess of reserve requirements set by central banking authorities.