Asked by Risha Aprilia on May 31, 2024
Verified
Money supply would expand if people chose to hold borrowed funds in cash rather than in checking accounts.
Money Supply
The comprehensive amount of money assets found in an economy at a noted time.
Checking Accounts
Bank accounts that allow for both deposits and withdrawals, enabling easy access for daily transactions.
- Gain an understanding of how money supply undergoes expansion or reduction.
Verified Answer
AW
Amanda WattsJun 06, 2024
Final Answer :
False
Explanation :
When people hold borrowed funds in cash rather than depositing them into checking accounts, it does not increase the money supply because the overall amount of money in circulation remains the same. The expansion of the money supply typically occurs through the banking system's ability to lend more than the initial deposits (fractional-reserve banking), which is not directly affected by whether individuals hold their funds in cash or in checking accounts.
Learning Objectives
- Gain an understanding of how money supply undergoes expansion or reduction.
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