Answer to Question #310594 in Microeconomics for Madushu

Question

Which of the following statement(s) is/are correct?

a) In South Africa, money is created exclusively by the South African Reserve Bank.

b) The stock of money consists largely of bank deposits and banks create these deposits by making loans.

c) Money creation by banks is constrained by the demand for bank loans.

d) The South African Reserve Bank uses changes in interest rates as an attempt to regulate the rate at which new money is created.

e) The stock (quantity) of money in the economy is essentially determined by the interaction of the interest rate and the independent supply of money

Answer 1

b) The stock of money consists largely of bank deposits and banks create these deposits by making loans

c) Money creation by banks is constrained by the demand for bank loans.

c) Money creation by banks is constrained by the demand for bank loans.

e) The stock (quantity) of money in the economy is essentially determined by the interaction of the interest rate and the independent supply of money