Explain why the money supply does NOT change when one individual writes a check to another
What will be an ideal response?
When one individual writes a check to another there is an offsetting increase and decrease to the money supply. The bank into which the check is deposited begins to expand the money supply but the bank that has lost a deposit begins to contract it. The net result is no change.
You might also like to view...
A financial institution that wants a 5 percent real return on its loans and contemplates a 4 percent annual inflation rate should loan at a nominal interest rate of approximately
A) minus 1 percent. B) 1 percent. C) 9 percent. D) 15 percent. E) 20 percent.
Countercyclical fiscal policy refers to
a. any fiscal policy that cycles between budget surpluses and budget deficits b. the use of taxes and government spending to keep the economy close to potential GDP in the short run c. any fiscal policy that is employed during a business cycle d. the use of open market purchases of bonds to keep the economy close to potential GDP in the short run e. the use of changes in tax rates to keep the economy at potential output in the long run