eco 29 chap 3
Kevin purchasing concert tickets with his debit card is an example of the ________ function of money. A. specialization B. store of value C. medium of exchange D. unit of account
medium of exchange
When money is used as acceptance for payment of goods and services, it is being used as a When money is used to express the relative value of goods and services, it is being used as a When money is used to hold purchasing power for future use, it is being used as a
medium of exchange. Unit account store of value
If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts are A. bank deposits. B. money. C. loanable funds. D.reserves.
money
In ancient Greece, what property made gold a more likely candidate for use as money than wine? Gold's property as a made it a more likely candidate for use as money when compared to wine.
store of value
Patrick places his pocket change into his savings bank on his desk each evening. By his actions, Patrick indicates that he believes that money is a A. store of value. B. unit of specialization. C. medium of exchange. D. unit of account.
store of value.
20. Most of the time it is quite difficult to separate the three functions of money. Money performs its three functions at all times, but sometimes we can stress one in particular. For each of the following situations, identify which function of money is emphasized. 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. In this case, money is being used as a 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. In this case, money is being used as a Maria is currently pregnant. She expects her expenditures to increase in the future and decides to increase the balance in her savings account. In this case, money is being used as a
20. medium of exchange. unit of account. as a store of value.
When compared to exchange systems that rely on money, disadvantages of the barter system include: A. the requirement of a double coincidence of wants. B. lowering the cost of exchange to those who would specialize. C. lowering the cost of exchanging goods over time. D. encouraging specialization and the division of labor.
the requirement of a double coincidence of wants.
Compared to an economy that uses a medium of exchange, in a barter economy A. transaction costs are higher. B. liquidity costs are lower. C. transaction costs are lower. D. liquidity costs are higher.
transaction costs are higher
Dennis notices that jackets are on sale for $99. In this case money is functioning as a ________. A. unit of account B. payments −system ruler C. store of value D. medium of exchange
unit of account
In Brazil, a country that underwent a rapid inflation before 1994, many transactions were conducted in dollars rather than in reals, the domestic currency. During this period, the US dollar served what property or properties in Brazil? A. Unit of account B. Medium of exchange C. Store of value D. A and B are correct E. B and C are correct F. A, B, and C are correct
A, B, and C are correct
Which of the following statements about fiat money is false? A. Fiat money is redeemable into a particular precious metal such as gold. B. Fiat money is paper currency decreed by government as legal tender. C. Fiat money is easier to transport than commodity money. D. Fiat money should be made difficult to counterfeit.
Fiat money is redeemable into a particular precious metal such as gold.
People in the United States in the nineteenth century were sometimes willing to be paid by cheque rather than with gold, even though they knew that there was a possibility that the cheque might bounce. Which of the following would represent an advantage of gold over cheques as a form of money? A. Gold is easily divisible and may be used for small expenditures B. Gold is easy for an individual to carry from place to place C. Gold has intrinsic value when compared to cheques D. Gold is easy to transfer from one city to another or one state to another
Gold has intrinsic value when compared to cheques
Which of the following statements best explains how the use of money in an economy increases economic efficiency? A. Money increases economic efficiency because it is costless to produce. B. Money cannot have an effect on economic efficiency. C. Money increases economic efficiency because it decreases transactions costs. D. Money increases economic efficiency because it discourages specialization.
Money increases economic efficiency because it decreases transactions costs.
Which of the following is an example of fiat money? A. a twenty dollar gold piece B. sea shells used as money in a primitive society C. cigarettes in a POW (prison) camp D. a five dollar bill
a five dollar bill
The diagram to the right shows the rate of inflation in the United States over the past 35 years. As it is well known, the United States experienced double-digit inflation in the late 1970s. What property would lead individuals to hold more money in the 1990s than in the 1970s? Everything else equal, this would demonstrate the property of money as
a store of value.
For a commodity to function effectively as money it must be A. difficult to make change. B. hard to carry around. C. easily standardized, making it easy to ascertain its value. D. deteriorate quickly so that its supply does not become too large.
easily standardized, making it easy to ascertain its value.
In prison, cigarettes are sometimes used among inmates as a form of payment. All of the following explain how cigarettes solve the "double coincidence of wants" problem, even if a prisoner does not smoke, except: A. cigarettes are widely accepted as a form of payment in prison. B. prisoners can exchange cigarettes for other goods and services. C. exchanging cigarettes for other goods and services increases transaction costs. D. cigarettes serve as a medium of exchange.
exchanging cigarettes for other goods and services increases transaction costs.