Which of the Following Is an Assumption Made in the Money-Creation

question 101

Multiple Choice

Which of the following is an assumption made in the money-creation process?

• A) Banks only lend to borrowers who they know will pay them back.
• B) Banks hold no excess reserves.
• C) Banks lend out all deposits and hold no reserves.
• D) Banks hold all deposits as vault cash.
• E) Individuals do not deposit any currency in a bank.

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Definitions:

Normal Growth

In stock pricing models, growth at a rate less than the rate of return. Growth rates in excess of the rate of return are super normal.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, typically with fixed dividends.

Annual Return

The percentage change in the value of an investment over a one-year period, including dividends, interest, and capital gains.

Supernal Growth

refers to extraordinary or exceptional growth in a business or economic sector.