Unpredictable Shocks to the Financial System

question 50

Multiple Choice

Unpredictable shocks to the financial system

• A) reduce the demand for money.
• B) increase the demand for money.
• C) cause consumers and firms to switch to credit cards.
• D) affect small depositors more so than large depositors.
• E) result in money neutrality.

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Definitions:

Risk Aversion

Risk Aversion is the tendency to avoid or minimize risks, reflecting a preference for certainty or safer options when making decisions under conditions of uncertainty.

Zeigarnik Effect

A tendency to experience automatic, intrusive thoughts about a goal whose pursuit has been interrupted.

Temporal Discounting

The tendency to value immediate rewards more highly than future rewards, affecting decision-making and impulse control.

Delay Gratification

The capacity to withstand the lure of an instant gratification in favor of a future, potentially more significant, reward.