People Forgo Interest and Hold Money

question 126

Multiple Choice

People forgo interest and hold money:

• A) because they are required to.
• B) to reduce their transaction costs.
• C) because there are no substitutes for money.
• D) because banks are too risky.

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Definitions:

Required Reserves

The minimum amount of funds that a bank or financial institution must hold in reserve, as mandated by a central bank or regulatory authority, to ensure financial stability and liquidity.

Bond Prices

The cost or market price of a bond, which moves inversely to changes in interest rates; when rates go up, bond prices go down, and vice versa.

Money Supply

refers to the total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.

Economy Growth

An increase in the production of goods and services in an economy over time.