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Credit cards are excluded from all measures of the quantity of money, because they are not really a method of payment, but a method of deferring payment. When you buy a meal with a credit card, the bank that issued the card pays the restaurant the amount that is due. At a later date, you will have to repay the bank, perhaps with interest. For this, you might use the money in your demand deposits, and that money is included in the economy's stock of money. Which of the following can happen with an increased use of credit cards in an economy? A. increase in money supply B. decrease in money supply C. increase in money demand D. decrease in money demand |
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Answer» D. decrease in money demand |
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