Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?
What will be an ideal response?
Banks create money to make a profit. Banks create money when they make loans. The loans take the form of checking account deposits. Asking why banks create money is the same as asking why they make loans.
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If, in the market for money, the amount of money supplied exceeds the amount of money households and businesses want to hold, the interest rate will
A. fall, causing households and businesses to hold less money. B. rise, causing households and businesses to hold more money. C. fall, causing households and businesses to hold more money. D. rise, causing households and businesses to hold less money.
As more people started using smart phones, the number of smart phone applications available rose, increasing the smart phone's value to those who already owned one. This is an example of a(n) ________
A) pecuniary externality B) network externality C) moral hazard D) adverse selection
The measure most commonly used by economists to gauge the standard of living of a nation is: a. labor productivity
b. nominal GDP. c. real GDP. d. real GDP per capita.
The money supply and money demand curves are _____ and ______ respectively. a. Vertical; downward sloping
b. Upward sloping; vertical c. Upward sloping, downward sloping d. None of the above