What happens to the money supply when a bank accepts deposits of currency from the public and places it in check able deposits (or checking accounts)?
What will be an ideal response?
The composition of the money supply changes, but there has been no change in the economy’s total supply of money. In this case, bank money or check able deposits have increased and currency held by the public has decreased by an equal amount.
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You have a $500 saving bond. The nominal interest rate is 10 percent, and the inflation rate is 4 percent. After a year, in real terms you have earned
A) $70. B) $40. C) $50. D) $510. E) $30.
Since most people prefer more money to less, the desire for more money
A) makes it difficult to induce people to cooperate. B) makes it difficult to induce people to sacrifice for the larger public good. C) makes social order highly unstable and unpredictable. D) can induce useful changes in behavior. E) implies people are living in a capitalist society.