- A fiat currency is money becasue the State says it is. -The Fed has two main m

Question

- A fiat currency is money becasue the State says it is.

-The Fed has two main measures of the money supply, M1 and M2, which include government money (Federal Reserve Notes) and bank money (checking deposits in M1 and checking plus savings deposits in M2).

-Money must meet the three functions.

Question: One explanation for inflation is that "there is too much money chasing too few goods." What does this mean?

In your response, consider what money is, how it gets created, and how it relates to GDP.

Explanation / Answer

1. A fiat currency is money becasue the State says it is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury or at any Federal Reserve Bank.

2. True

3. Three functions money must meet are

1. Store of value

2. Medium of Exchange

3. Unit of account

4. This means that demand is growing faster than supply, and thus prices will increase and inflation is bouond to happen.This usually occurs in growing economies.

If you don't understand anything then comment. I'ill revert back on the same. :)

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