Chapter Three

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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


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