Questions: UNIT 3-CHALLENGE 3.1: History of Money Which of the following statements regarding central banks is true? a.) They are charged with the regulation of money supply and interest rates. b.) A run could never happen at central banks. c.) They are not required to maintain cash on hand. d.) As the value of the currency becomes more certain, people rely more on commodity standards.

The answer is a.) They are charged with the regulation of money supply and interest rates.

This statement is true. Central banks are responsible for managing a country's currency, money supply, and interest rates. They use these tools to influence economic activity, control inflation, and stabilize the financial system. For example, the Federal Reserve in the United States adjusts interest rates to either encourage borrowing and spending or to cool down an overheating economy.

This statement is false. While central banks are generally more stable than commercial banks due to their ability to create money, they are not immune to crises. Historical events, such as the collapse of central banks in countries experiencing hyperinflation or severe economic distress, demonstrate that central banks can face significant challenges.

This statement is false. Central banks do maintain reserves and cash on hand to ensure liquidity in the financial system. They act as a lender of last resort to commercial banks, providing them with the necessary funds during times of financial stress.

This statement is false. When the value of a currency is stable and certain, people tend to rely less on commodity standards (such as gold or silver) and more on fiat money, which is backed by the government's promise rather than a physical commodity. Stable fiat currencies are generally preferred for their convenience and efficiency in modern economies.