Econ 353 ch 3 review

Order these Most liquid asset to least liquid: 1. Time deposits 2. Check able deposits 3. Savings accounts 4. Currency

Currency, checking deposits, savings accounts, time deposits

Which of the following properties must an object have in order to function well as a medium of exchange? 1. Must be rare and in limited supply 2. Same units have same value 3. Must be universally acceptable as a means of payment 4. Must be made of paper 5. Must be divisible

2 3 and 5

If there are 4 goods in a barter economy, then one needs to know __ prices in order to exchange one good for another

6. (4*3/2)

Which of the following sequences accurately describes the evolution of the payments system? A) Barter, coins made of precious metals, paper currency, checks, electronic funds transfers B) Barter, coins made of precious metals, checks, paper currency, electronic funds transfers C) Barter, checks, paper currency, coins made of precious metals, electronic funds transfers D) Barter, checks, paper currency, electronic funds transfers

A) Barter, coins made of precious metals, paper currency, checks, electronic funds transfers

Which of the following statements uses the economists' definition of money? A) Gas costs $3.80 per gallon - that's a lot of money! B) Uncle Charlie has a lot of money in his pension funds. C) I make too little money to buy my favorite Ferrari! D) The job with New Company gave me the opportunity to earn more money.

A) Gas costs $3.80 per gallon - that's a lot of money!

If an individual moves money from a demand deposit account to a money market deposit account, A) M1 decreases and M2 stays the same. B) M1 stays the same and M2 increases. C) M1 stays the same and M2 stays the same. D) M1 increases and M2 decreases.

A) M1 decreases and M2 stays the same.

If an individual moves money from a small-denomination time deposit to a demand deposit account, A) M1 increases and M2 stays the same. B) M1 stays the same and M2 increases. C) M1 stays the same and M2 stays the same. D) M1 increases and M2 decreases.

A) M1 increases and M2 stays the same.

Which of the following characteristics does the US $1 bill possess: A. It is Unbacked by gold or silver B. it is debt of the federal reserve C. It pays annual interest D.it is legal tender E. It is debt of the federal reserve

A, b and d

If an individual moves money from his checking account into his savings account: A. M1 decreases but m2 remains same B. M1 decreases, m2 decreases C. M1 increases, m2 increases D. M1 stays same, m2 increases

A. M1 decreases but m2 remains the same

Dennis notices that jackets are on sale for $99. In this case money is functioning as a ________. A) medium of exchange B) unit of account C) store of value D) payments-system ruler

B) unit of account

Which of the following properties must an object have in order to function well as a medium of exchange? Place a circle around your choices. a. It must be rare and in limited supply (like diamonds) b. Same units must have same value c. It must be universally acceptable as a means of payment d. It must be made of paper e. It must be divisible. f. It must be legal tender

B, C, E

Ranking assets from most liquid to least liquid, the correct order is: A. Savings bonds; house; currency B. Currency; savings bonds; house C. Currency; house; savings bonds D. House; savings bonds; currency

B. Currency; savings bonds; house

The difference between money and income is that: A. Money is a flow and income is stock B. Money is a stock and income is a flow C. No difference, both stocks D. No difference, both flows

B. Money is a stock and income is a flow

During hyperinflations: A. Value of money rises rapidly B. Money no longer function as a good store of value and people may resort to barter transactions on much larger scale C. Middle class savers benefit D. Money's value remains fixed to the price lever

B. Money no longer function as a good store of value and people may resort to barter transactions on much larger scale

Which of the following is not a form of e-money?

Credit card

Example of something that is not money?

Credit cards

Patrick places his earnings from watering his neighbor's plants, in a cookie jar every week. By his actions, Patrick indicates that he believes that money is a A) medium of exchange. B) unit of account. C) store of value. D) unit of specialization

C) store of value.

When paper currency is decreed by government as legal tender, legally it must be__ A. Paper currency backed by gold B. A precious metal like gold or silver C. Accepted as payment for debts D. Convertible into an electronic payment

C. Accepted as payment for debts

Which of the following statements used the economists definition of money? A. I plan to earn a lot of money over the summer B. Betty is rich, she has a lot of money C. I hope that I have enough money to buy lunch D. The job with new company gave me money

C. I hope that I have enough money to buy my lunch today

The evolution of the payments system for barter to precious metals, then to fiat money, then to checks can best be understood as a consequence of: A. Government regulations designed to improve the efficiency of the payments system B. Government regulations designed to promise efficiency of the payments system C. Innovations that reduced the costs of exchanging goods and services D. Completion along firms to make it easier for products to be purchased

C. Innovations that reduced the costs of exchanging goods and services

Which of the following statements best explains how the use of money in an economy increased economic efficiency: A. Money increases economic efficiency because it is costless to produce B. Money increases economic efficiency because it discourages specialization c. Money increases economic efficiency because it decreases transactions costs D. Money cannot have an effort on economic efficiency

C.Money increases economic efficiency because it decreases transactions costs

If the price level triples (becomes three times of what it used to be), the value of money A) triples B) more than triples, due to scale economies. C) rises but does not triple, due to diminishing returns. D) falls by around 67%.

D) falls by around 67%.

If there are five goods in a barter economy, one needs to know ten prices in order to exchange one good for another. If, however, there are ten goods in a barter economy, then one needs to know ________ prices in order to exchange one good for another. A) 20 B) 25 C) 30 D) 45

D. 45

Which of the sequences accurately describes the evolution of the payments system across most economies in the world? A. Barter; metallic coins; checks; paper currency; electronic funds transfer B. Barter; checks; paper money; metallic coins; electronic funds transfer C. Barter; paper currency; metallic coins; checks; electronic funds transfer D. Barter; metallic coins; paper currency; checks; electronic funds transfer

D. Barter; metallic coins; paper currency; checks; electronic funds transfer

If the price level doubles, the value of money: A. Doubles B. More than doubles C. Rises but doesn't double, due to diminishing returns. D.Falls by 50%

D. Falls by 50%

The __ measures the amount of money in the US economy, using two different measures known as the monetary aggregates: m1 and m2

Federal reserve

Increasing transactions costs of selling an asset make the asset:

Less liquid

The narrowest measure of money is __ because it includes the assets with the highest __ while m2 includes the assets with the highest __

M1, liquidity, interest rates

In a barter economy with N goods, the number of relative prices that a trader must know is

N(n-1) / 2