In the Nineteenth Century, When There Were Often Bank Runs

question 116

Multiple Choice

In the nineteenth century, when there were often bank runs caused by crop failures, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, which action should the banks have taken?

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

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Definitions:

Spinoza's Metaphysics

An aspect of Spinoza's philosophy focusing on the nature of reality, substance, and the monistic idea that there is only one substance, God or Nature.

Radical Freedom

A concept that suggests individuals have the ultimate responsibility and freedom to choose and shape their own lives, often associated with existentialist philosophy.

Heraclitus

An ancient Greek philosopher known for his doctrine that change is the fundamental essence of the universe, famously encapsulated in the phrase "You cannot step into the same river twice."

Eternal Principle

An unchanging truth or law that is considered fundamental to the nature of reality.