Suppose that partners Kemp and Sam open a goldsmith shop and general store in the Wild West.The more rapidly people "cash in" their bank notes,
A)the higher their profit from making loans will be
B)the lower their profit from the goods in the store
C)the fewer bank notes they will be able to issue
D)the larger the denominations in which they will have to issue bank notes
E)the smaller their reserve ratio

Question

Quizplus · Accepted Answer

If people rapidly cash in their bank notes, Kemp and Sam will have fewer notes in circulation, limiting their ability to issue more notes.

Suppose That Partners Kemp and Sam Open a Goldsmith Shop