Which of the Following Best Describes the Chain of Events

question 446

Multiple Choice

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

• A) The monetary base increases. Banks acquire unplanned reserves which they loan out, increasing deposits and also the quantity of money. The new deposits then create additional unplanned reserves.
• B) 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.
• C) Desired reserves increase, encouraging banks to seek new deposits. When the new depositors come in, desired reserves decrease and the quantity of money increases.
• D) Low interest rates discourage people from holding currency. When they deposit the currency, interest rates rise, increasing the quantity of money.

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Definitions:

Standard Deviation

A statistic that quantifies the spread or dispersion of a distribution, indicating the average distance from the mean for data points.

Confidence Interval

A span of values, acquired through sample analysis, that is presumed to enclose the value of an undetermined population attribute.

Functioning Time

The duration or period during which a system, device, or component operates effectively.

Standard Deviation

A gauging of the extent of deviation or scattering among a group of figures.