Question at position 9 Decisions by ________ about their holdings of currency and by ________ about their holdings of excess reserves affect the money supply. banks; depositors depositors; borrowers depositors; banksborrowers; depositors单项选择题
A
banks; depositors
B
depositors; borrowers
C
depositors; banks
D
borrowers; depositors

Question

Question at position 9 Decisions by about their holdings of currency and by about their holdings of excess reserves affect the money supply. banks; depositors depositors; borrowers depositors; banksborrowers; depositors单项选择题

A

banks; depositors

B

depositors; borrowers

C

depositors; banks

D

borrowers; depositors

BlackTom AI · Accepted Answer

Decisions by depositors about how much currency to hold and decisions by banks about how much excess reserves to hold determine the money multiplier and therefore the money supply.

Relevant concepts: money supply M equals currency (C) plus deposits (D). The monetary base B equals currency plus reserves (R). Define the currency-deposit ratio c = C/D, the required reserve ratio rr, and the excess reserve ratio e so that total reserves R = (rr + e)D. These ratios determine the money multiplier m.

Step-by-step derivation:
1. Express M in terms of D: M = C + D = cD + D = (1 + c)D.
2. Express B in terms of D: B = C + R = cD + (rr + e)D = (c + rr + e)D.
3. Solve for D: D = B / (c + rr + e).
4. Substitute into M: M = (1 + c)D = (1 + c) * B / (c + rr + e).
5. So the money multiplier m = M / B = (1 + c) / (c + rr + e).

Why the correct answer is correct: The multiplier shows M depends on c (depositors’ preference for currency) and e (banks’ preference to hold excess reserves). If depositors increase c (hold more currency), the numerator and denominator change in a way that reduces the multiplier and thus M for a given B. If banks increase e (hold more excess reserves), the denominator rises, lowering the multiplier and reducing M. Therefore, decisions by depositors regarding currency holdings and by banks regarding excess reserves directly affect the money supply.

Why the other choices are wrong:
- "banks; depositors": Banks do not primarily decide public currency holdings—depositors do.
- "depositors; borrowers": Borrowers do not determine banks’ excess reserve holdings.
- "borrowers; depositors": Borrowers do not determine currency holdings; depositors do.

Conclusion: The correct answer is depositors; banks, which matches the provided answer.

Question at position 9 Decisions by about their holdings of currency and by about their holdings of excess reserves affect the money supply. banks; depositors depositors; borrowers depositors; banksborrowers; depositors单项选择题

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Question at position 9 Decisions by ________ about their holdings of currency and by ________ about their holdings of excess reserves affect the money supply. banks; depositors depositors; borrowers depositors; banksborrowers; depositors单项选择题

类似问题

If the government finances spending by issuing debt to the public, the monetary base and money supply will:

If banks choose to increase their excess reserves, the money supply will:

The money supply is determined by:

Which is NOT in M2?

Question at position 19 The money supply is ________ related to expected deposit outflows, and is ________ related to the market interest rate.positively; negatively negatively; negativelynegatively; positivelypositively; positively

Question at position 11 The money supply is ________ related to expected deposit outflows, and is ________ related to the market interest rate.negatively; negativelypositively; positivelypositively; negatively negatively; positively

Question at position 8 Decisions by ________ about their holdings of currency and by ________ about their holdings of excess reserves affect the money supply. borrowers; depositorsdepositors; borrowers banks; depositors depositors; banks

Question at position 8 If the required reserve ratio is 10%, currency in circulation is $300 billion, checkable deposits are $900 billion, and excess reserves total $1 billion, then the money supply is ________ billion. $2700$1200$1800$3000$3100

更多留学生实用工具

希望你的学习变得更简单

Question at position 9 Decisions by about their holdings of currency and by about their holdings of excess reserves affect the money supply. banks; depositors depositors; borrowers depositors; banksborrowers; depositors单项选择题

Question at position 19 The money supply is related to expected deposit outflows, and is related to the market interest rate.positively; negatively negatively; negativelynegatively; positivelypositively; positively

Question at position 11 The money supply is related to expected deposit outflows, and is related to the market interest rate.negatively; negativelypositively; positivelypositively; negatively negatively; positively

Question at position 8 Decisions by about their holdings of currency and by about their holdings of excess reserves affect the money supply. borrowers; depositorsdepositors; borrowers banks; depositors depositors; banks