In Explaining the Evolution of Money, ________

question 59

Multiple Choice

In explaining the evolution of money, ________.

• A) government regulation is the most important factor
• B) commodity money, because it is valued more highly, tends to drive out paper money
• C) new forms of money evolve to lower transaction costs
• D) paper money is always backed by gold and therefore more desirable than cheques

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Definitions:

Commercial Banks

Financial institutions that provide services such as accepting deposits, providing business and personal loans, and offering basic investment products.

Required Reserves

The minimum amount of funds that a bank must hold in reserve against deposit liabilities, as mandated by central banking authorities.

Reserve Bank

A central banking institution responsible for overseeing the monetary policy, issuing currency, and regulating the banking system of a country.

Required Reserve Ratio

The fraction of deposits that a bank is required by regulation to hold in reserve and not lend out, aiming to ensure bank liquidity and stability.