An argument in favor of fractional-reserve banking is that
A) unregulated institutions would be riskier than regulated fractional-reserve banks.
B) it increases the precision of the central bank's control over the quantity of money.
C) a bank deposit is owned by the depositor, so the bank has no legal right to lend the deposit to someone else.
D) it decreases the risk of a bank running out of cash.
A
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Suppose you can earn 5 percent on your savings account if you deposit $500 in it. The inflation rate is 3 percent. The opportunity cost of holding the $500 as money is
A) $100. B) $525. C) $80. D) $30. E) $25.
Given a fixed nominal interest rate on a loan, unanticipated inflation:
a. decreases the burden of paying off the loan. b. increases the burden of paying off the loan. c. does not alter the burden of paying off the loan. d. benefits savers.