Chapter Three
Rank the following assets from most liquid (1) to least liquid (6): Rank the following assets from most liquid (1) to least liquid (6): LOADING... Asset Rank a. Checking account deposits b. Houses c. Currency d. Automobile e. Savings deposits f. Common stock
2 6 1 5 3 4
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.
45
If an individual moves money from a demand deposit account to a money market deposit account,
M1 decreases and M2 stays the same
________ are the time and resources spent trying to exchange goods and services.
Transaction costs.
Which of the following is not a form of e-money?
a credit card
Of the following assets, the least liquid is
a house
A feature of Bitcoin, a new type of electronic money, that make it attractive as a medium of exchange is
anonymous transactions
Whatever a society uses as money, the distinguishing characteristic is that it must
be generally acceptable as payment for goods and services or in the repayment of debt.
A smart card is the equivalent of
cash
Because inflation in Germany after World War I sometimes exceeded 1,000 % per month, one can conclude that the German economy suffered from
hyperinflation
Monetary aggregates are
measures of the money supply reported by the Federal Reserve.
If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts are
money
A payments system based on money is
more efficient than a barter economy because fewer prices are needed to establish relative values between all commodities.
Currency includes:
paper money and coins.
Debt Money Income Savings deposits Wealth
stock variable stock variable flow variable stock variable stock variable
Maria is currently pregnant. She expects her expenditures to increase in the future and decides to increase the balance in her savings account.
store of value (money is being used)
When compared to exchange systems that rely on money, disadvantages of the barter system include:
the requirement of a double coincidence of wants
What is the main disadvantage of moving to e-money LOADING... or moving to a cashless society?
there are problems with security and privacy
Tim wants to calculate the relative value of oranges and apples, and therefore checks the price per pound of each of these goods quoted in currency units.
unit of account (money is used as)
The currency component includes paper money and coins held in ________.
the hands of the nonbank public
which of the following represents an advantage of using commodity money LOADING... for transactions?
It has an intrinsic value beyond its use as a medium of exchange
is the relative ease and speed with which an asset can be converted into cash.
Liquidity
________ is the relative ease and speed with which an asset can be converted into a medium of exchange.
Liquidity
For each of the following assets, indicate which, if any, of the monetary aggregates includes them: a. Currency b. Money market mutual funds (noninstitutional) c. U.S. T-bills (with maturities of less than 90 days) d. Small-denomination time deposits e. Large-cap mutual funds f. Check-able deposits
M1 and M2 M2 only Neither M1 nor M2 M2 only Neither M1 nor M2 M1 and M2
Brooke accepts money in exchange for performing her daily tasks at her office, since she knows she can use that money to buy goods and services.
Medium of exchange (money is being used)
is the most liquid store of value in the economy.
Money
Which of the following is not a purpose or function of money?
Protection against inflation
Money is
anything that is generally accepted in payment for goods and services or in the repayment of debt.
Ranking assets from most liquid to least liquid, the correct order is
currency; savings bonds; house
