Practice Factors Affecting The Money Supply (2.2)

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10 questions

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6 sample questions

Question 1.
What is the role of the central bank?
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Think about the institution that regulates the economy.
Question 2.
What does a lower reserve ratio mean for banks?
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Consider the link between reserves and lending capacity.
3Question 3.
What is one tool central banks use to control money supply?
- Reserve Ratio
- Stock Market
- Interest Rate Swaps
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Look for terms related to banking and regulation.
4Question 4.
True or False: Higher public demand for cash typically increases the money supply.
- True
- False
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Think about what happens to cash versus deposits.
Question 5.
Evaluate a scenario where the central bank raises the reserve ratio. Discuss the potential short-term and long-term effects on the money supply and economic activity.
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Think about the balance between inflation control and economic growth.
Question 6.
Analyze case studies where public demand for cash surged. How did banks and the central bank respond to maintain economic stability?
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Consider both immediate and strategic responses in your analysis.

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