Question

1. The country has entered a period of economic growth, but prices are rising too rapidly. To stabilize prices, the Federal Reserve decides to

decrease the federal funds rate

decrease the reserve requirement

raise the discount rate

buy more government securities

2. Mark washes his jeans and finds that the $20 bill that was in his pocket is in four pieces. He takes the four pieces to the bank and receives a nice crisp $20 bill. What function of money does this illustrate?

Measure of value

Medium of exchange

Divisibility

Store of value

Answer 1

1. The country has entered a period of economic growth, but prices are rising too rapidly. To stabilize prices, the Federal Reserve decides to decrease the federal funds rate. The answer is the first choice.
2. Mark washes his jeans and finds that the $20 bill that was in his pocket is in four pieces. He takes the four pieces to the bank and receives a nice crisp $20 bill. The function of money that this illustrates is medium of exchange. The answer is second choice.