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Who are the four 'players' in the money supply process?

A) Banks, consumers, government, foreign institutions.
B) Central banks, commercial banks, consumers, businesses.
C) Individuals, corporations, credit unions, investment firms.
D) Governments, central banks, financial markets, households.

1 Answer

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Final answer:

Central banks, commercial banks, consumers, businesses. These four groups work together to form an interconnected system that maintains the flow of money in the economy through deposits, loans, and other financial transactions.

The correct answer is B.

Step-by-step explanation:

The four 'players' in the money supply process include the central banks, commercial banks, consumers, and businesses. Therefore, the correct answer to the question 'Who are the four 'players' in the money supply process?' is B) Central banks, commercial banks, consumers, businesses.

The central bank is the primary institution responsible for conducting monetary policy and ensuring the nation's financial system operates efficiently. Commercial banks accept deposits and give out loans to businesses and individuals, playing a pivotal role in the process.

Consumers and businesses are also integral parts of the money supply, acting as depositors and borrowers, which allows for economic transactions in the goods, labor, and financial markets.

Money, loans, and banks form an interconnected system where deposits are made into bank accounts, which are then loaned out, creating a cycle that underpins the functioning of the economy.

When this cycle operates smoothly, it supports economic growth by connecting savers with borrowers and facilitating transactions in various markets. However, when there are disruptions in the banking system, it can lead to economic problems such as recession or inflation.

The correct answer is B.

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