Question

The existence of banks:____________.
A. results in the money supply being larger than the amount of currency in circulation
B. results in the money supply being less than the amount of currency in circulation
C. creates an economic system that is inferior to the barter economy
D. inhibits the creation of money
E. makes the money supply equal to the amount of currency in circulation

Answer 1

Answer: E. makes the money supply equal to the amount of currency in circulation

Explanation: money supply is the total amount or value of money in circulation or existing in an economy while currency in circulation is the total amount or value of money released in an economy by the monetary institutions like the federal reserve and Centre banks minus the money removed from the economy.

So with banks, money supply and currency in circulation can be checked and made equal.