Which of the following is correct?
A)The Fed can control the money supply precisely.
B)The amount of money in the economy does not depend on the behavior of depositors.
C)The amount of money in the economy depends in part on the behavior of banks.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The behavior of banks, such as their willingness to lend and create new loans, plays a significant role in determining the amount of money in the economy. The Fed can influence this behavior through its monetary policy tools, but it cannot control the money supply precisely. The behavior of depositors, while a factor, is not the primary determinant of the money supply. Therefore, option C is the correct statement.

Which of the Following Is Correct