Question

Suppose a period of continuous political instability leads people to believe that the economy will slide into a deep recession. As a result, people become more likely to accept ______money in exchange for goods and services. U.S. dollars are an example of _____ money.

Answer 1

Answer:

(1) Commodity

(2) Flat

Explanation:

(1) Commodity

If people expect a deep recession coming ahead, they know that fiat (paper) money will lose all its purchasing power. Holding fiat money will not buy them their standard basket of goods & services, so they will prefer to hold commodity money.

(2) Flat

Fiat money is the legal tender money authorized by government, and any country's currency is a fiat money.