During Wars, the Public Tends to Hold Relatively More Currency

question 181

Multiple Choice

During wars, the public tends to hold relatively more currency and relatively fewer deposits. Which of the following best describes the effects of this increase in currency holdings?

• A)Reserves would decrease, and the money supply would increase.
• B)Reserves and the money supply would decrease.
• C)Reserves would increase, but the money supply would be unchanged.
• D)Reserves would decrease, but the money supply would be unchanged.

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Definitions:

Treasury Stock

Shares of a company's own stock that it has reacquired and held in the company's treasury.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock and typically does not have voting rights but has a fixed dividend.

Common Stock

A type of equity security that represents ownership shares in a corporation, providing voting rights and entitling the holder to a share of the company’s success through dividends and/or capital appreciation.

Treasury Stock

Shares that were once part of the outstanding shares and were bought back by the company.