BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the velocity of money increases
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real interest rates are increase
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unemployment is low
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people keep cash in their mattresses
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Detailed explanation-1: -Money is created within the banking system when banks issue loans; it is destroyed when the loans are repaid. An increase (decrease) in reserves in the banking system can increase (decrease) the money supply.
Detailed explanation-2: -Therefore, total decrease in deposits = initial withdrawal * deposit multiplier.
Detailed explanation-3: -The bank raises the interest rate it pays on deposits. Which of the following statements about money creation by banks is false? A bank creates money when it buys securities.
Detailed explanation-4: -By lowering the reserve requirements, banks are able to loan more money, which increases the overall supply of money in the economy. Conversely, by raising the banks’ reserve requirements, the Fed is able to decrease the size of the money supply.