trenton Mccarthy, chapter 10, question 6

Belief and trust are the backbone to what currency is worth in every country in this world. Whether it's food, paper money, or other miscellaneous items, belief in the system is what determines the value. Wheelen uses an example that stood out to me having to do with India's faith in its rupees. Even though torn or crumpled bills are legal, in other words banks will accept them, business owners don't accpet them out of fear that others won't either. This then starts a downward spiral eventually leaking into the mindsets of tourists. Another example is US money. We ditched the gold standard many years ago, so basically we are dealing with paper, just paper that is green with a face on it. With that being said, it is now a true statement that value relies on this confidence that people have in their currency. Relying on a belief system just seems extremely vulnerable to economic crashes and other catastrophes which means that the fed is always faced with a difficult task: maintaining the status quo because people can get scared fast. If people get scared about the economy, then people lose that confidence which is ever so essential to what we live our life on, paper money etc. this is why the fed doesn't want to promote economic growth to fast or too slow. Either one could very well have a detrimental effect if our minds, our confidence, and our lack of trust and belief let it