If Many People Were to Suddenly Deposit into Their Checking

question 156

Multiple Choice

If many people were to suddenly deposit into their checking accounts large sums of cash previously held in their homes and/or wallets, and there were no offsetting actions by the Fed or change in institutional policies, this would

• A) decrease the M1 money supply but increase the M2 money supply.
• B) increase the excess reserves of banks and expand the money supply if these reserves are used to make additional loans.
• C) reduce the excess reserves of banks and indirectly decrease the M1 money supply.
• D) reduce the excess reserves of banks and indirectly increase the M1 money supply.

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Definitions:

Trusts

Legal arrangements where one party, known as the trustor, grants another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.

Market Competition

The rivalry among companies to attract customers and gain market share by offering better products, services, and terms.

Bid Rigging

An agreement among firms to not bid against one another or to submit a certain level of bid.

Price Fixing

A restraint of trade in which two or more competitors agree to set prices for a product or service.