Whatever Happened to Penny Candy?

Final Exam

Multiple Choice – circle the correct answer

1. Inflation is
a. Rising prices
(b). An increase in the amount of money
c. Rising wages
d. Rising wages and prices
e. Increasing taxes

2. Deflation is
a. Falling prices
(b). A decrease in the amount of money
c. Falling wages
d. Falling wages and prices
e. Decreasing taxes

3. Inflation causes
a. More valuable money
b. Taxes
c. War
(d). The wage/price spiral
e. Stagflation

4. A law of economics is
a. A ruling passed by congress
b. A guideline Which can be changed
(c). A fact of life which no one can change
d. Part of the law of gravity
e. Impossible for you to understand

5. An example of the law of supply & demand is

a. Rising prices cause rising wages
b. Rising wages cause rising taxes
c. The amount of money goes up and the value goes up
d. The amount of taxes goes up and the value of money goes down
(e). The amount of money goes up and the value goes down
6. Gresham’s Law says
a. Good money drives bad money out of circulation
(b). Bad money drives good money out of circulation
c. Good money circulates rapidly
d. Bad money circulates slowly or not at all
e. Prices Will never stop rising

7. During severe inflations, wage/price controls have

a. Always worked
b. Usually worked
c. Worked 92% 0f the time
d. Worked 43% 0f the time
(e). Never worked

8. A depression is
(a). A correction period following an inflation
b. A short recession
c. A devaluation
d. Caused by high unemployment
e. No longer possible

9. A recession is
a. A long depression
(b). An incomplete depression
c. Caused by high unemployment
d. A devaluation
e. Worse than a depression

10. Money is
a. The most valuable thing a person can have
b. The most worthless thing a person can have
(c). The most easily traded thing people have
d. Always legal tender
e. The cause of inflation
Answer the following Questions

11. Why are some coins reeded?

To give them the appearance of gold and silver coins. It is a defense

against clipping/counterfeiting.

12. What does TANSTAAFL mean? Explain.

There Ain't No Such Thing As A Free Lunch

Nothing is truly free. Someone must pay for it, if not with money then with
time and hard work.

13. What is wealth?

The good and services people produce. It is NOT money. Money is the tool we
use to trade wealth.

14. How is the government of the United States financed?

Taxation

15. What does legal tender mean?

Legal tender is moneyt because the government says it is. People who do
not treat it as money are punished if they are caught.

16. What is velocity of money?

The speed at which money changes hands. It is an indicator of the demand for
money.
17. Define “counterfeiting.”

To make something that is fake or phony.

18. Prior to printing presses, how did the Roman government counterfeit?

The Roman government counterfeited by clipping coins, meaning they shaved

the edges of the coin, then used the shavings to mint, or make, new debased
coins. Also, the government would melt down the precious metal coins, add in
base metal, and re-mint the debased coins so there were more in circulation.

19. Throughout the centuries, what two metals have had the characteristics of
good money?

• gold
• silver

20. What happens if someone owes you money, and you refuse to accept Federal
Reserve Notes in payment of the debt?

The debt is cancelled.

Bonus Question: What are the two fundamental types of law, and who/what grants
an individual's rights under each type?

Natural law – rights are granted by the Creator

Civil or Roman law – rights are granted by the government