In the 19th Century,when Crop Failures Often Led to Bank

question 7

Multiple Choice

In the 19th century,when crop failures often led to bank runs,banks would make relatively fewer loans and hold relatively more excess reserves.By itself,these actions by the banks should have

• A)increased the money multiplier and the money supply.
• B)decreased the money multiplier and increased the money supply.
• C)increased the money multiplier and decreased the money supply.
• D)decreased both the money multiplier and the money supply.

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Definitions:

Put Option

A contractual agreement allowing the possessor the choice, not the duty, to dispose of a particular volume of an underlying asset at an agreed-upon rate before a certain deadline.

Strike Price

The predetermined price at which an option's holder has the right to purchase (for a call option) or sell (for a put option) the underlying asset.

Option

An option is a financial derivative that gives the holder the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified timeframe.