Economics - Economics Section 2

46. To act as a liberating medium of exchange, money should least likely be:

  • Option : B
  • Explanation : Money should be difficult to counterfeit for it to act as a liberating medium of exchange.
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47. If the reserve requirement for banks in an economy is 8%, the total money created from a deposit of $100 into an account is closest to:

  • Option : C
  • Explanation : The increase in money from an additional deposit in the banking system = new deposit / reserve requirement = $100 / 0.08 = 1250.
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48. Given that the reserve requirement in an economy is 10 percent for banks, how much money can be created with a deposit of $200?

  • Option : C
  • Explanation : Money Created = Deposit / Reserve Requirement = 200 / 0.1 = 2000.
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49. The speculative demand for money refers to the demand to hold money:

  • Option : C
  • Explanation : Speculative demand for money relates to the demand to hold speculative money balances based on the potential opportunities or risks that are inherent in other financial instruments.
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50. If the expected return on other assets fall, the speculative demand for money will:

  • Option : A
  • Explanation : If the expected return on other assets falls, then the opportunity cost of holding money also falls and can, in turn, lead to an increase in the speculative demand for money.
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