Chapter 3

Which of the following sequences accurately describes the evolution of the payments system? Barter, coins made by precious metals, checks, paper currency, electonic funds transfers. Barter, checks, paper currency, electronic funds transfers. Barter, coins made of precious metals, paper currency, checks, electronic funds transfers. Barter, checks, paper currency, coins made of precious metals, electronic funds transfers

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

A person's house is part of her: income money wealth liabilities

wealth

If there are four goods in a barter economy, then one needs to know _____ prices in order to exchange one good for another. 8 6 5 4

6

_____ is a flow of earnings per unit of time. Currency Income Wealth Money

Income

_____ is the narrowest monetary aggregate that the Fed reports. M2 M3 M0 M1

M1

Of the following, the largest is: M1 money market deposit accounts. M2 demand deposits

M2

Which of the following statements accurately describes the two measures of the money supply? The two measures' movements closely parallel each other, even on a month-to-month basis. Short-run movements in the money supply are extremely reliable. M2 is the narrowest measure the Fed reports. The two measures do not move together, so they cannot be used interchangeably by policymakers.

The two measures do not move together, so they cannot be used interchangeably by policymakers.

_____ are the time and resources spent trying to exchange goods and services. Barter costs Contracting costs Transaction costs Bargaining costs

Transaction costs

Money is: a flow of earnings per unit of time. always based on a precious metal like gold or silver. the total collection of pieces of property that are a store of value. anything that is generally accepted in payment for goods and services or in the repayment of debt.

anything that is generally accepted in payment for goods and services or in the repayment of debt.

Compared to checks, paper currency and coins ahve the major drawbacks that they: are not the most liquid assets. must be backed by gold. are easily stolen. are hard to counterfeit.

are easily stolen.

Compared to an electronic payments system, a payment system based on checks has the major drawback that: fraud may be more difficult to commit when paper receipts are eliminated. checks are less costly to process. legal liability is more clearly defined. checks take longer to process, meaning that it may take several days before the depositor can get her cash.

checks take longer to process, meaning that it may take several days before the depositor can get her cash.

A disadvantage of _____ made from precious metals is that it is very heavy and hard to transport from one place to another. fiat money commodity money paper money electronic money

commodity money

The conversion of a barter economy to one that uses money: does not increase economic efficiency. increases efficieny by reducing the need to exchange goods and services. increases efficiency by reducing transaction costs. increases efficiency by reducing the need to specialize

increases efficiency by reducing transactions costs

A fall in the level of prices: increases the value of money. has an uncertain effect on the value of money. does not affect the value of money reduces the value of money.

increases the value of money

All of the following are necessary criteria for a commodity to function as money except: it must detoriate quickly. it must be divisible. it must be widely accepted. it must be easy to carry.

it must deterioate quickly.

Increasing transactions costs of selling an asset make the asset: more moneylike more liquid less liquid more valuable

less liquid

The M2 monetary aggregate contains everything that is in M1 plus other assets that are highly _____ (can be turned into cash quickly at very little costs). consistent stable liquid efficient

liquid

Monetary aggregates are: measures of the wealth of individuals. never redefined since "money" never changes. measures of the money supply reported by the Federal Reserve. reported by the Treasury Department annually.

measures of the money supply reported by the Federal Reserve.

The difference between money and income is that: money is a stock and income is a flow. money is a flow and income is a stock. there is no difference - money and income are both flows. there is no difference - money and income are both stocks.

money is a stock and income is a flow

_____ is used to make purchases. _____ is the total collection of pieces of property that serve to store value. wealth; income income; money money; income money; wealth

money; wealth

Currency includes: paper money, coins, and checks paper money, coins, checks, and savings deposits. paper money and checks paper money and coins

paper money and coins

Although _____ currency is lighter than coins made of metals, a disadvantage arising from modern technology is the ease of _____. commodity; counterfeiting fiat; transport paper; transport paper; counterfeiting

paper; counterfeiting

Because it is a unit of account, money: reduces the number of prices that need to be calculated discourages specialization increases transaction costs does noto earn interest

reduces the number of prices that need to be calculated

When we say that money is a stock variable, we mean that: the quantity of money is measured at a given point in time. it is sold in the equity market. we must attach a time period to the measure. money never loses purchasing power.

the quantityy 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: encouraging specialization and the division of labor. lowering the cost of exchange to those who would specialize. the requirement of a double coincidence of wants. lowering the cost of exchanging goods over time.

the requirement of a double coincidence of wants.