Suppose That in a Country People Gain More Confidence in the Banking

question 107

Multiple Choice

Suppose that in a country people gain more confidence in the banking system and so hold relatively less currency and more deposits.As a result,bank reserves will

• A)decrease and the money supply will eventually decrease.
• B)decrease and the money supply will eventually increase.
• C)increase and the money supply will eventually decrease.
• D)increase and the money supply will eventually increase.

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Definitions:

Compounded Annually

Pertaining to an interest calculation method where interest is added to the principal at the end of each year, and future interest is calculated on the total.

Compounded Annually

An interest calculation method where interest is added to the principal sum once a year, allowing it to earn interest in the subsequent year.

Annuity

A finance tool that disburses a predetermined series of payments, typically to support individuals financially during retirement.

Future Value

The value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.