Who Determines the Amount of Money in the Economy

question 127

Multiple Choice

Who determines the amount of money in the economy?

• A) The Bank of Canada controls the money supply precisely.
• B) The amount of money in the economy does not depend on the behaviour of depositors.
• C) The amount of money in the economy depends in part on the behaviour of banks.
• D) The Minister of Finance determines the amount of money in the economy by law.

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Definitions:

Cost of Equity

The return that investors expect for investing in a company's equity, reflecting the risk compared to the risk-free rate of return.

Beta

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio compared to the market as a whole.

Market Risk

The risk of losses in investments due to market-wide phenomena, affecting all investments across the board.

CAPM Approach

A financial model used to determine the expected return on an investment, considering its risk relative to the market using the Capital Asset Pricing Model.