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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From 2015 to 2016, the overall price level rose from 200 to 220. Over this same period, tuition rates at the local community college rose from $100 to $115 per credit hour. What can be concluded from the rise in tuition relative to overall inflation?
a) Tuition rates increased at the same rate as inflation. b) Tuition rates increased at a slower rate than inflation. c) Tuition rates increased at a faster rate than inflation. d) Tuition rates and inflation cannot be compared with the numbers given.
If a banker expects interest rates to fall in the future, her best strategy for the present is
A) to increase the duration of the bank's liabilities. B) to buy short-term bonds. C) to sell long-term certificates of deposit. D) to increase the duration of the bank's assets.