An increase in the perceived instability of banks
A)leads to bank failure.
B)decreases the demand for money.
C)increases people's dependence on banks for transactions.
D)led to the elimination of reserve requirements in 1992.
E)increases the demand for money.

Question

Quizplus · Accepted Answer

An increase in the perceived instability of banks would make people more hesitant to keep their money in banks, which increases the demand for money as people would prefer to keep cash on hand instead. Therefore, the best choice is E - "increases the demand for money".

An Increase in the Perceived Instability of Banks