Understanding Money and the Federal Reserve

What primarily gives a hundred dollar bill its value over other pieces of paper?

• Its widespread acceptance in trade

• The government's declaration

• The material it's made from

• The artwork on the bill

What significant change occurred to the US dollar in 1971?

• It was linked to gold

• It was no longer accepted internationally

• It was backed by silver

• It became a fiat currency

What was the US dollar linked to before 1971?

• Foreign currencies

• Gold and silver

• Industrial output

• Oil reserves

Which entity is responsible for setting the monetary policy in the United States?

• The Legislative Branch

• The Executive Branch

• The Judicial Branch

• The Federal Reserve

Why can't the Federal Reserve just print an unlimited amount of money?

• The printing machines have a limit

• It would cause inflation

• It's against international law

• It would lead to deflation

What is the main purpose of currency?

• To be exchanged for goods and services

• To be saved for future use

• To showcase a country's wealth

• To collect as memorabilia

What is the primary reason too much inflation is harmful to the economy?

• It increases the value of money

• It makes international trade more competitive

• It decreases consumer spending

• It leads to overconsumption and shortages

What does deflation cause people to do with their money?

• Spend it immediately

• Invest it in stocks

• Hold onto it, reducing spending

• Convert it into foreign currency

Why is a small amount of inflation considered necessary?

• It reduces the national debt

• It increases the value of currency

• It stimulates economic growth

• It encourages saving

How does the Federal Reserve aim to manage the economy?

• By printing more money

• By setting interest rates

• By changing tax laws

• By controlling the money supply