GOVT 350 Exam 4
What is Inflation? - ANS-Inflation alters the relationship between prices and cost.
What is Debauched Currency? - ANS-Money whose purchasing power has been
reduced. It inflates prices across the economic spectrum.
What is the nature of money? - ANS-a. Primitive forms relate to objects or services
"bartered" for other objects or services given the subjective value assessments of each.
[No Intrinsic Value; Minimum Wage?]
Anticipation of exchange rests upon the acceptance of that medium by others in a
potential transaction. More advanced mediums of exchange have been "metallic" based
or consisted of precious metals, even gems. "Paper" eventually superseded all forms of
exchange in stable economies because of its convenient nature.
Why is it economically unsound to confuse money with wealth? - ANS-Wealth is actual
products and services, money merely represents them.
What is Hyper-Inflation? - ANS-50% or more: Paper currency no longer functions as a
media of exchange.
What is 'Deflation' as an economic phenomenon? - ANS-Results from a contraction of
the money supply.
What are Friedman's 5 general truths relative to inflation? - ANS-1. Inflation is a
monetary phenomenon arising from a more rapid increase in the quantity of money than
in output (though of course, the reason for the increase in money may be various).
2. In today's world government determines—or can determine—the quantity of money.
3. There is only one cure for inflation: a slower rate of increase in the quantity of money.
4. It takes time—measured in years, not months—for inflation to develop; it takes time
for inflation to be cured.
5. Unpleasant side effects of the cure are unavoidable.
What is the cure for Inflation? - ANS-A reduction in the rate of monetary growth is the
only means by which inflation can be remedied.
How can the US Government increase the money supply? - ANS-Through Open Market
Operations. If the FR intends to increase reserves (Money Supply) it buys securities and
What is Inflation? - ANS-Inflation alters the relationship between prices and cost.
What is Debauched Currency? - ANS-Money whose purchasing power has been
reduced. It inflates prices across the economic spectrum.
What is the nature of money? - ANS-a. Primitive forms relate to objects or services
"bartered" for other objects or services given the subjective value assessments of each.
[No Intrinsic Value; Minimum Wage?]
Anticipation of exchange rests upon the acceptance of that medium by others in a
potential transaction. More advanced mediums of exchange have been "metallic" based
or consisted of precious metals, even gems. "Paper" eventually superseded all forms of
exchange in stable economies because of its convenient nature.
Why is it economically unsound to confuse money with wealth? - ANS-Wealth is actual
products and services, money merely represents them.
What is Hyper-Inflation? - ANS-50% or more: Paper currency no longer functions as a
media of exchange.
What is 'Deflation' as an economic phenomenon? - ANS-Results from a contraction of
the money supply.
What are Friedman's 5 general truths relative to inflation? - ANS-1. Inflation is a
monetary phenomenon arising from a more rapid increase in the quantity of money than
in output (though of course, the reason for the increase in money may be various).
2. In today's world government determines—or can determine—the quantity of money.
3. There is only one cure for inflation: a slower rate of increase in the quantity of money.
4. It takes time—measured in years, not months—for inflation to develop; it takes time
for inflation to be cured.
5. Unpleasant side effects of the cure are unavoidable.
What is the cure for Inflation? - ANS-A reduction in the rate of monetary growth is the
only means by which inflation can be remedied.
How can the US Government increase the money supply? - ANS-Through Open Market
Operations. If the FR intends to increase reserves (Money Supply) it buys securities and
