Why do Households Hold Money? What Type of Bank Deposits are Included in the Money Supply: Economics Assignment, SMU, Singapore

Assignment Details:

1. Why do households hold money? What type of bank deposits are included in the money supply?

2. Contactless cards make it possible to make a payment by holding the card near a reader, with no requirement to enter a PIN number or provide a signature. They allow customers to make a transaction more quickly and conveniently than using cash.

However, there is a limit on the size of the transaction and some shops will not accept cards for very small transactions. Are contactless cards a perfect substitute for cash? What effect is the introduction of contactless cards likely to have on holdings of cash and bank deposits?f What are the risks of contactless cards? Which sectors of the economy prefer working with cash rather than electronic payments involving banks?

3. What is a reserve requirement for a bank? What determines the reserve ratio of a bank? If a bank has a reserve ratio of 3, starts with zero cash, and then receives a cash deposit of 03,000 how much can it lend? What is the effect of lending on the money supply in the economy?

4. What is quantitative easing? Why dot the Bank of England adopt a policy of quantitative easing after the financial crisis of 2007-2009? Was the policy successful?