Suppose That Households Became Mistrustful of the Banking System and Decide

question 167

Multiple Choice

Suppose that households became mistrustful of the banking system and decide to decrease their checking accounts and increase their holdings of currency.Using the money demand and money supply model and assuming everything else is held constant,the equilibrium interest rate should

• A)increase.
• B)decrease.
• C)not change.
• D)increase,then decrease.

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Definitions:

Evaluation Apprehension

Anxiety or fear about being judged or evaluated by others, which can affect performance and behavior.

Process Loss

Reductions in group performance compared to individual performance, often due to coordination and motivation problems within the group.

Steiner

A psychologist known for his formulations on group productivity, specifying that the actual productivity of a group is based on its potential productivity minus losses due to faulty group processes.