Because Inflation Undermines Money's Unit of Account Function, Government Policy

question 136

Multiple Choice

Because inflation undermines money's unit of account function, government policy will try to keep it:

• A)at zero.
• B)at a low rate.
• C)negative.
• D)at either a low or a negative rate.

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Definitions:

Open Market Operations

Central bank activities that buy and sell government securities in the open market to influence liquidity and interest rates.

Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulating banks, maintaining the stability of the financial system, and providing financial services.

United States Treasury

It is the national treasury of the United States, responsible for issuing all Treasury bonds, notes, and bills and managing the federal government's revenue and debt.

Open Market

A market structure characterized by a high degree of competition where buyers and sellers can freely conduct transactions.