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Chapter 13: Problem 5

Which one of the following is not part of our money supply? (LO2) a) Dollar bills b) Demand deposits c) Traveler's checks d) Gold

Short Answer

Expert verified
d) Gold

Step by step solution

01

Understanding Money Supply Components

In order to identify which option is not part of the money supply, let's briefly review the main components of money supply: 1. Currency: This includes physical cash, like dollar bills and coins. 2. Demand deposits: These are checking account balances that can be withdrawn on demand. 3. Traveler's checks: These are checks issued by financial institutions, which function like cash and can be exchanged for goods and services.
02

Analyzing Option A: Dollar Bills

Dollar bills are a physical form of currency, which is a component of the money supply. They can be used as a medium of exchange for goods and services and can be stored as a form of wealth. Therefore, option A is part of the money supply.
03

Analyzing Option B: Demand Deposits

Demand deposits are checking account balances held in banks. These funds can be easily accessed and transferred, making them a convenient medium of exchange. They can also be considered a store of value. Therefore, option B is part of the money supply.
04

Analyzing Option C: Traveler's Checks

Traveler's checks are issued by financial institutions and function like cash. They are widely accepted as payment for goods and services, and they can be stored as a form of wealth. Therefore, option C is part of the money supply.
05

Analyzing Option D: Gold

Gold is a valuable commodity that has been used as a form of currency throughout history. However, in modern economies, gold is not widely accepted as a medium of exchange for goods and services. Although gold can be considered a store of value, it is not part of the current money supply.
06

Answer

Based on our analysis, the option that is not part of the money supply is: d) Gold

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Most popular questions from this chapter

Which statement is true? (LO3) a) Credit cards are a form of money. b) Debit cards are a form of money. c) M2 is about six times the size of M1. d) \(\mathrm{M} 1\) is about six times the size of \(\mathrm{M} 2\).

Which statement is true? (LO6) a) Most states allow only unit banking. b) Most states allow unlimited branching. c) Most banks have national charters. d) None of these statements is true.

People tend to hold more money as (LO4) a) incomes rise and credit availability rises b) incomes fall and credit availability falls c) incomes rise and credit availability falls d) incomes fall and credit availability rises

Which one of the following is the most accurate statement? (LO9) a) Banks usually extend overdraft privileges only to their largest depositors. b) Bankers know that if they extend overdraft privileges, virtually all their depositors will end up having to pay substantial finance charges. c) Using overdraft privileges are a great way to borrow money, because you won't have to pay any finance charges if you pay off your balance before the end of the month. d) If you have a low checking deposit balance and your bank has extended you overdraft privileges, then every check, debit charge, or ATM withdrawal puts you at risk of racking up substantial finance charges.

To get a bank charter, you need to demonstrate each of the following, except (LO6) a) that your community needs a bank or an additional bank b) that you have sufficient banking experience c) that you have enough capital to start a bank d) that you are of good character
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