True or False: \"Whenever loans are repaid, money is destroyed.\" True False How

Question

True or False: "Whenever loans are repaid, money is destroyed." True False How might architecture help stabilize the banking system? By increasing depositors' risk aversion O By satisfying depositors' aesthetic demands O By boosting depositors' confidence O By increasing a bank's real estate value Which of the following assumptions make the predictions made using the simple deposit multiplier unrealistic? Check all that apply. Nonbank public holds on cash Zero excess reserves O Zero leakage Banks holding excess reserves of their own choosing Which of the following are thought to result in a leakage from the banking system to the nonbank public? Check all that apply. O The free-rider problem Moral hazard O A lack of financial market development O The subprime mortgage defaults

Explanation / Answer

1) True, the deposits are canceled out against the asset and the balance sheet shrinks on both sides and hence money is destroyed as the deposits disappear from the economy.

2) c) By boosting depositors confidence, due to good architectural design the depositor will be confident in the bank and this will stabilize the financial system.

3) B) Zero excess reserves, Banks loan out all their excess reserves.

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