What Must Be True When People Decide to Hold Some

question 25

Multiple Choice

What must be true when people decide to hold some of their cash and not deposit it?

• A) The money multiplier overestimates how much money will be created in the economy.
• B) The money multiplier underestimates how much money will be created in the economy.
• C) The reserve ratio is not fully functioning and should be raised.
• D) The reserve ratio is working too well and should be lowered.

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Definitions:

Note Payable

A written agreement to pay a specified sum of money, plus interest, on a set date, representing a liability for the issuer.

Proceeds

The total amount of money received from a transaction before any deductions are made for costs or expenses.

Interest-Bearing

Referring to debt securities or loans that accrue interest over time, payable to the holder or lender.

Note Payable

A written promise to pay a specified amount of money, usually with interest, at a designated future date.