The correct answer is: C. will neither increase nor decrease.
If all the banks in an economy are nationalized and converted into a monopoly bank, the total deposits will neither increase nor decrease. This is because the total amount of money in the economy is not affected by the number of banks. The only thing that changes is the ownership of the banks.
When banks are nationalized, the government becomes the owner of all the banks. This means that the government now has control over all the money that is deposited in banks. However, the total amount of money in the economy does not change. The government cannot create new money out of thin air.
The only way that the government could increase the total amount of money in the economy would be to print more money. However, this would cause inflation, which is a general increase in prices. Inflation is bad for the economy because it makes it harder for people to afford goods and services.
Therefore, the government is unlikely to print more money just because it has nationalized all the banks. As a result, the total deposits in the economy will neither increase nor decrease.
Here is a brief explanation of each option:
- Option A: The total deposits will decrease. This is not likely to happen because the government cannot simply take money out of people’s bank accounts. If the government did this, it would cause a lot of anger and resentment.
- Option B: The total deposits will increase. This is also not likely to happen because the government cannot simply create new money out of thin air. If the government did this, it would cause inflation.
- Option C: The total deposits will neither increase nor decrease. This is the most likely outcome because the government cannot simply take money out of people’s bank accounts or create new money out of thin air.
- Option D: None of the above. This is not a valid option because it does not provide a clear answer to the question.