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Question 4

The major components of the money supply—paper money and
checkable deposits—are

A.

legal tender

B.

token money

C.

debts, or promises to pay

D.

assets of the Federal Reserve Banks

4 points

Question 5

If the price level increases 20%, the purchasing power of money
decreases

A.

14.14%

B.

25%

C.

16.67%

D.

20%

4 points

Question 6

High rates of inflation in an economy will

A.

increase the use of money as a measure of value

B.

increase the purchasing power of money

C.

decrease the use of money as a medium of exchange

D.

decrease the conversion of money to gold