Unit 4 Public Policy

One way the Federal Reserve can counter unemployment and stimulate spending is by —

• Selling securities

• Decreasing the discount rate

• tightening monetary polices

• Increasing the reserve requirement

Inflation is a general decrease in price?

• True

• False

What is Commodity Money?

• Item that have no value in themselves

• Inconvertible paper money made legal tender by a government decree

• A form of money which has intrinsic value, meaning it is worth something in its own right rather than simply being a token of financial value

• What people are willing to accept in exchange for goods and services

Contractionary fiscal policies address inflationary economic problems and are intended to —

• extend the expansion phase of the business cycle

• decrease the amount of money in circulation

• increase the level of economic investment

• encourage consumer spending

Fiat money has value simply because the government says it does?

• TRUE

• False

One of the disadvantages of operating a barter system is that trading is -

• Carried out in very large markets

• Taking place without currency

• Limited by availability & demand

• conducted without consumer protections

The Federal Reserve System designed in the manner described above resulted in the creation of -

• a decentralized system of banks

• One large depository for U.S. Currency

• Reserve bank satellite locations

• New methods for printing money

Why did abandoning the gold standard result in a decline in the value of the U.S. dollar?

• More currency was able to be printed thus reducing its value

• People began hording dollar bills so the value would decline

• Businesses preferred to be paid with gold thus dollars were less valued

• Americans did not want to use fiat currency so the value declined

When Bartering, Cash is needed?

• TRUE

• FALSE

In the U.S. free enterprise system one of the primary roles of the government is to —

• employ a majority of the workforce

• guarantee that investors profits are secure

• provide new sources of funding for technology start ups

• ensure the safety of products through regulation