Why would a goldsmith ever want to print more receipts than the amount of gold deposited?
A)in a rational expectations equilibrium, gold was never withdrawn by the depositors
B)the goldsmith had acquired a good reputation and therefore was allowed by the depositors to print more receipts
C)the gold inventory was relatively stable over time so there was little withdrawal risk
D)the goldsmith simply wanted to save the depositors the unnecessary needs to convert receipts to gold
E)all of the above

Question

Quizplus · Accepted Answer

If the gold inventory is relatively stable over time, there is little risk of depositors withdrawing all their gold at once, allowing the goldsmith to safely print more receipts than the amount of gold deposited. The other options are not valid reasons for a goldsmith to print more receipts than the amount of gold deposited.

Why Would a Goldsmith Ever Want to Print More Receipts