Econ 2035 Ch 3 Jha LSU

which statements uses the economists' definition of money?

"I hope that i have enough money to buy my lunch today"

small-denomination time deposits refer to certificates of deposit w/ denomination of less than _____

$100,000

of the following, which is least liquid? (stocks, traveler check, house, bank deposits)

house

If merchants in country Zed choose to close doors, preferring to be stuck w/ rotting merchandise than worthless currency, then one can conclude Zed's experiencing

hyperinflation

bc inflation in Germany after WWI exceeded 1,000% per month, one can conclude German economy suffered from _____

hyperinflation

____ is a flow of earnings per unit of time

income

an individual's annual salary is her

income

which is true?

income is a flow variable

a fall in level of prices _____ value of money

increases

the conversion of a barter economy to one that uses money does what? How's it do so

increases efficiency by reducing transaction costs

evolution of payment system from barter to precious metals, then fiat, then checks can best be understood as consequence of

innovations that reduces the cost of exchanging goods/services

as a store of value, money

is a way for saving for future purchases

increasing transaction costs of selling an asset make the asset ___ liquid

less

_____ is relative ease/speed which an asset can be converted to medium of exchange

liquidity

monetary aggregates are

measures of the money supply reported by the Fed

Kevin purchasing concert tickets with debit card is example of the _____ function of money

medium of exchange

of Money's 3 functions, the 1 that distinguishes money from other assets is its function as a _____

medium of exchange

payment system is

method of conducting transactions in the economy

Since it doesn't have to be converted to make purchase, ____ is most liquid asset

money

if peanuts serve as medium of exchange, a unit of account, and a store of value, then peanuts are ____?

money

to an economist, ____ is anything that's generally accepted in payment for goods/services or in repayment of debt

money

during hyperinflations ____ no longer serves as a good ______ and ppl may resort to barter transactions on much larger scale

money store of value

which statement best explains how use of money in an economy increases economic efficiency?

money increases economic efficiency bc it decreases trisection costs

diff bw money and income is that

money's a stock income is a flow

recent financial innovation makes Federal Reserve's job of conduction monetary policy ___ difficult since Fed no longer knows what to consider ____

more money

in explaining evolution of money

new forms of money evolve to lower transaction costs

generally, the initial money supply data reported by fed is ___

not a reliable guide to short-run behavior of the money supply

bc its a unit of account, money reduces ___

number of prices needed to be calculated

currency includes

paper money coins

hyperinflation

period of extreme inflation, usually >50% per month

the evolution of payment system from barter to precious metals, then to fiat money, then to checks can best be understood as consequence of the fact that

precious metals were difficult to carry/transport

introduction of checks to payment system reduced costs of exchanging goods/services. Another advantage is that

provide convent receipts for purchases

money ____ transaction cost, allowing ppl to specialize in what they do best

reduces

Fed revises its estimates of the monetary aggregates, sometime by large amounts bc

seasonal adjustments become more precise only as data's more available

the increase in holiday spending is not same every year, causing Fed's adjustment for _____ ____ to be revised as more data becomes available

seasonal variation

Fed estimates initial monetary aggregate reports because ____ depository institutions report the ant of their deposits infrequently

small

which is NOT included in M1 measure of money but IS includes in M2? (currency, travelers checks, demand deposits, small-den time deposits)

small-denomination time deposits

Patrick places pocket change into savings bank on his desk each day, By his actions, he indicates that he believes money is a _______

store of value

compared to electronic payment system, payment system based on checks has major drawback that

take longer to process money transfer isn't immediate

ecen economist have no single, precise definition of money because

the "moneyness" or liquidity of an asset is a matter of degree

when we say that money is a stock variable, we mean that

the quantity of money is measured at a given point in time

when compared to exchange systems that rely on money, disadvantages of the barter system include

the requirement of a double coincidence of wants

all but the most primitive societies use money as medium of exchange, implying that___

the use of money is economically efficient

_____ are time and resources spent trying to exchange goods/services

transaction costs

compared to an economy that uses medium of exchange, in a barter economy

transaction costs are higher

an electronic payments system hasn't completely replaced paper system for reasons EXCEPT

transportation costs

M1 measure of money includes (small denomination time deposits, money market deposit acct, money mkt mutual funds, travelers check)

traveler's checks

Dennis notes that jackets are on sale for $99. In this case, money's functioning as ______

unit of account

when money prices are used to facilitate comparisons of value, money is said to function as a ___

unit of account

components of US M1 money supply are demand and checkable deposits + ____

currence + travelers checks

ranking assets from most to least liquid, correct order is what?

currency savings bonds house

currency component includes paper money and coins held in ___

hands of nonbank public

decade during which growth rates of monetary aggregates diverged most is

1990's

which accurately describes 2 measure of money supply

2 measures don't move together, so CANNOT be used interchangeably by policymakers

if there's 5 goods in barter economy, need to know 10 prices in order to exchange goods. If 10 goods in barter economy, need to know ____ prices in order to exchange one good for another

45 (10(9)) / 2 = 90/2

If there's 4 goods in barter economy, one needs to know ___ prices to exchange goods for one another

6

which of the following is NOT e-money (credit card, debit, stored value, smart card)

Credit Card

which is included in M1 and M2 (currency, saving del, small den, mm deposit acct)

Currency

an examination of revised money supply statistics, when compared to initial statistic, suggest that the initial statistics ____

DO NOT provide good guide to short-run movements in money supply

paper currency that's been declared legal tender but isn't convertible into coins/precious metals is called ____ money

Fiat Money

which is NOT included in measure of M1 (NOW acct, demand deposits, currency, savings deposits)

Savings deposits

____ is narrowest monetary aggregate that Fed reports

M1

if individual moves money from demand deposit acct to money market deposit acct,

M1 decreases M2 stays same

If individual redeems US savings bond for currency,

M1 increases M2 increases

If individual moves money from small-denomination time deposit to demand deposit

M1 increases M2 stays same

if individual moves money from money market deposit acct to currency,

M1 increases M2 stays same

If individual moves money from saving deposit acct to money market deposit account

M1 stays same M2 stays same

if individual moves money from currency to demand deposit account

M1 stays same M2 stays same

of the following the largest is? (mm deposit acct, demand deposits, M1, M2)

M2

all of following are necessary criteria for commodity to function as money except?

MUST DETERIORATE QUICKLY be divisible easy to carry widely accepted

___ is used to make purchases while ____ is the total collection of pieces of property that serve to store wealth

Money Wealth

Which's included in M2 but NOT m1 (NOW, demand del, currency, mm mutual fund shares)

Money Market Mutual Fund Shares (retail)

the initial money supply data reported by Fed aren't a reliable guide to short-run movements in money supply such as ___, but ARE reliable for longer periods such as a _____

Month year

defining money becomes ___ difficult as the pace of financial innovation _____

More Quickens

which is NOT included in monetary aggregate M2? (saving bonds, currency, trav check, checking deposit)

Savings Bonds

In a barter economy, the number of prices in an economy with N goods is?

[N(N-1)] / (2)

a problem with barter exchange when there are many goods is that in a barter system,

a multiple number of prices exist for each good

When paper currency is decreed by gov as legal tender, legally it must be _____

accepted as payments for debts

money is ___

anything generally accepted in payment for goods/services or in repayment of debt

which sequence accurately describes evolution of payments system?

barter; coins made of precious metals; paper currency; checks; electronic funds transfers

whatever a society uses as money, the distinguishing characterist is that it mus

be generally accepted as payment for goods/services or in repayment of debt

Smart card is equivalent to

cash

explain how dig's could be "money" in POW camps of WWII

cigs performed 3 functions. 1) served as medium of exchange (bought things w/ cigs). 2) served as unit of account (prices quoted in # of cigs) 3) served as store of value (ppl willing to save cigs for exchange in future)

a disadvantage of ____ is that it's very heavy and hard to transport

commodity money

as payment systems evolve from barter to monetary system, ____ money's likely to precede use of ____ currency

commodity money paper currency

why're most of US dollars held outside US

concern ab high inflation eroding value of their own currency causes foreigners to hold US dollar as hedge against inflation risk

for a commodity to function effectively as money, it must be

easily standardized, making it easy to ascertain its value

compared to checks, paper currency and coins have drawback of

easily stolen

when economist say that money promotes ____, they mean that money encourages specialization and the division of labor

efficiency

during past 2 decades an imp characteristic of modern payments system has been rapidly increasing use of ____

electronic fund transfers

what factors've slowed movement to system where all payments are electronically paid

expensive equipment security of info privacy concerns

ppl hold money even during inflationary episodes when other assets prove to be better stores of value. This's explained by fact that money is ________

extremely liquid

if price level doubles, value of money _____

falls by 50%

a person's hous is part of their

wealth

the total collection of pieces of property that serve to store value is a person's

wealth