Chapter 16, Assignment 1

A

An asset would be usable as a medium of exchange for all of the following reasons except: A) the asset should be a commodity that has intrinsic value. B) the asset should be divisible since goods are valued at different amounts. C) the asset should be durable and not lose value due to spoilage. D) the asset must be generally accepted by most people.

B

A baseball fan with a Mike Trout baseball card wants to trade it for a Giancarlo Stanton baseball card, but everyone the fan knows who has a Stanton card doesn't want a Trout card. Economists characterize this problem as a failure of the A) market clearing mechanism. B) principle of a double coincidence of wants. C) theory of comparative advantage. D) irrational exuberance doctrine.

B

A double coincidence of wants refers to A) the situation where two parties are involved in a transaction where money is the medium of exchange. B) the fact that for a barter trade to take place between two people, each person must want what the other one has. C) the idea that a barter economy is more efficient than an economy that uses money. D) the situation in which a good that is used as money also has value independent of its use as money.

All four functions

If something is to be considered as money, it has to fulfill _____________________________________.

C

In the late 1940s, the Communists under Mao Zedong were defeating the government of China in a civil war. The paper currency issued by the Chinese government was losing much of its value, and most businesses refused to accept it. At the same time, there was a paper shortage in Japan. During these years, Japan was still under military occupation by the United States. Some U.S. troops in Japan realized that they could use dollars to buy up vast amounts of paper currency in China, ship it to Japan to be recycled into paper, and make a substantial profit. Under these circumstances, was the Chinese paper currency a commodity money or a fiat money? A) It is a fiat money because it has value as recycled paper. B) It is a fiat money because it has no value except as money. C) It is a commodity money because it has value as recycled paper. D) It is a commodity money because it has no value except as money.

Inflation

Money is an imperfect standard of deferred payment because ___________________ causes the value of money to decrease over time.

B

Money serves as a standard of deferred payment when A) it can be easily stored today and used for transactions in the future. B) payments agreed to today but made in the future are in terms of money. C) sellers are willing to accept it in exchange for goods or services. D) all of the above are examples of money serving as a standard of deferred payment.

A

Money serves as a unit of account when A) prices of goods and services are stated in terms of money. B) it can be easily stored and used for transactions in the future. C) sellers are willing to accept it in exchange for goods and services. D) all of the above are examples of money serving as a unit of account.

A

The English economist William Stanley Jevons described a world tour during the 1880s by a French singer, Mademoiselle Zelie. One stop on the tour was a theater in the Society Islands, part of French Polynesia in the South Pacific. She performed for her usual fee, which was one-third of the receipts. This turned out to be three pigs, 23 turkeys, 44 chickens, 5,000 coconuts, and "considerable quantities of bananas, lemons, and oranges." She estimated that all of this would have had a value in France of 4,000 francs. According to Jevons, "as Mademoiselle could not consume any considerable portion of the receipts herself, it became necessary in the meantime to feed the pigs and poultry with the fruit." Do the goods Mademoiselle Zelie received as payment fulfill the four functions of money? A) No. The goods are not a store of value. B) No. The goods are not a medium of exchange. C) Yes. The goods fulfill all four functions of money. D) No. The goods are only a medium of exchange and store of value.

C

The U.S. dollar can best be described as A) reserve money. B) commodity-backed money. C) fiat money. D) commodity money.

B

The economic definition of money is: A) A good that has intrinsic value. B) Any asset that people are generally willing to accept in exchange for goods and services. C) Anything authorized by the government to be used in an exchange. D) Anything of value owned by a person or a firm.

D

The use of money A) allows for greater specialization. B) eliminates the double coincidence of wants. C) reduces the transaction costs of exchange. D) all of the above.

B

What is fiat money? A) money that has value independent of its use as money B) money that is authorized by a central bank and that does not have to be exchanged for gold or some other commodity money C) an asset that has the ability to be easily converted into the medium of exchange D) money issued by financial intermediaries, such as banks, but not the central bank

D

When money is acting as a store of value, it allows an individual to A) exchange goods for other goods and services in the economy. B) trade money for goods and services in the economy. C) measure the value of goods and services in the economy. D) transfer dollars, and therefore purchasing power, into the future.

C

Which of the following best explains the difference between commodity money and fiat money? A) Commodity money has no value except as money, whereas fiat money has value independent of its use as money. B) Commodity money is usually authorized by the central bank, whereas fiat money has to be exchanged for gold by the central bank. C) Fiat money has no value except as money, whereas commodity money has value independent of its use as money. D) All money is commodity money, as it has to be exchanged for gold by the central bank.

D

Which of the following conditions make a good suitable for use as a medium of exchange? A) The good should be durable, valuable relative to its weight, and divisible. B) The good should be of standardized quality, so that any two units are identical. C) The good must be acceptable to (that is, usable by) most buyers and sellers. D) All of the above conditions must be met.

A

Which of the following is NOT a function of money? A) Acceptability B) Unit of account C) Medium of exchange D) Store of value

A

Which of the following is not a function of money? A) Commodity. B) Medium of exchange. C) Store of value. D) Unit of account. E) Standard of deferred payment.

D

Which of the following would be the least desirable candidate to be a good medium of exchange? A) gold B) dollar bills C) seashells D) milk

D

Which one of the following is not a function of money? A) Medium of exchange. B) Unit of account. C) Store of value. D) Open market operation.