If Uncertainty Causes Commercial Banks to Increase Their Holdings of Excess

question 168

Multiple Choice

If uncertainty causes commercial banks to increase their holdings of excess reserves, other things constant, this will

• A) reduce the money supply during a period of inflation and increase it during a recession.
• B) reduce the size of the deposit expansion multiplier.
• C) increase the size of deposit expansion multiplier.
• D) reduce the size of the deposit expansion multiplier during a period of inflation and increase it during a recession.

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Definitions:

UCS

An abbreviation for Unconditioned Stimulus, a stimulus that naturally and automatically triggers a response without prior conditioning.

Instinctive Behaviour

Inborn, automatic responses to specific stimuli that are not learned but rather naturally occur in all members of a species.

Conditioning

The process of learning associations between environmental stimuli and behavioral responses, often distinguished as classical or operant conditioning.

Cognitive Components

The aspects of thinking and understanding, including perception, memory, judgment, and reasoning.