Difficulty: Easy

Average Score: 100%

What does it mean if a bank's advertisement for a certificate of deposit (CD) indicates a 4% APY?

Rationale

The states

The Articles of Confederation, the first constitution of the United States, primarily vested governmental power in the individual states rather than in a centralized authority. This decentralized structure reflected a strong preference for state sovereignty and autonomy, limiting the authority of any national governing body.

A (The CD matures at the rate of 4% each year.) YOUR ANSWER

The correct choice. The Articles of Confederation established a system where the states retained significant power, including the ability to regulate trade, conduct foreign relations, and raise their militias. This arrangement aimed to prevent a strong central government that could potentially infringe on states' rights.

B (Only 4% of the CD's value can be withdrawn in any given year.) YOUR ANSWER

Incorrect. The United States had fought a revolutionary war to gain independence from the British monarchy, explicitly rejecting the idea of being ruled by a king. The Articles of Confederation sought to establish a government structure separate from monarchical authority.

C (You will pay 4% of the CD's value each year in service fees.) YOUR ANSWER

Incorrect. The position of president did not exist under the Articles of Confederation. The government created by this document lacked a single executive leader, such as a president, as the focus was on a system where power was decentralized among the states.

D (The CD will earn 4% interest each year that is then added to the CD's balance.) CORRECT

Incorrect. While the Articles of Confederation did establish a judicial system, the power wielded by the judiciary was limited compared to the authority granted to the states. The primary emphasis was on state autonomy rather than a strong federal judiciary.

Conclusion

The distribution of governmental power under the Articles of Confederation predominantly favored the states, reflecting a deliberate choice to limit centralized authority and prioritize state sovereignty. This arrangement aimed to strike a balance between collective action for common interests and the preservation of states' individual rights and autonomy.

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