Future Business Leader Achievments (FBLA) Economics Practice Exam

The amount of money available in the economy is the __________.

1. aggregate demand

2. money supply

3. money demand

4. excess reserves

The correct answer is: money supply

The correct answer is the money supply, which refers to the total amount of monetary assets available in an economy at a specific time. This includes physical currency, coins, and balances held in checking and savings accounts. The money supply is a critical factor influencing economic activity, as it affects interest rates, inflation, and overall economic growth. Understanding the money supply is essential for policymakers, as changes in the money supply can lead to fluctuations in consumer spending, investment, and, consequently, the health of the economy. When the money supply increases, it can potentially stimulate economic growth by making more money available for businesses and consumers. Conversely, a decrease can signal tightening of financial conditions. The other options do have related but distinct meanings. Aggregate demand reflects the total demand for goods and services within the economy at a given price level. Money demand refers to how much money people want to hold, which is influenced by factors such as income levels and interest rates. Excess reserves represent the funds that banks hold beyond what is required by regulation, but this is a narrower concept focused specifically within the banking system. All these terms contribute to understanding economic mechanics, but the definition of the money supply is the one that matches the context of the question.