Question 1

A problem with barter exchange when there are many goods is that in a barter system ________.

Accepted Answer

A)  transactions costs are minimized
B)  there exists a multiple number of prices for each good
C)  there is only one store of value
D)  exchange of services is impossible

Question 2

The currency component includes paper money and coins held in ________.

Accepted Answer

A)  bank vaults
B)  ATMs
C)  the hands of the nonbank public
D)  the central bank

Question 3

Explain the evolution of the payments system. Is the system headed towards a cashless society?

Accepted Answer

Societies begin with a barter system and...

Question 4

Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called ________ money.

Accepted Answer

A)  commodity
B)  fiat
C)  electronic
D)  funny

Question 5

Dennis notices that jackets are on sale for $99. In this case money is functioning as a ________.

Accepted Answer

A)  medium of exchange
B)  unit of account
C)  store of value
D)  payments-system ruler

Question 6

Introduction of cheques into the payments system reduced the costs of exchanging goods and services. Another advantage of cheques is that ________.

Accepted Answer

A)  they provide convenient receipts for purchases
B)  they can never be stolen
C)  they are more widely accepted than currency
D)  the funds from a deposited cheque are available for use immediately

Question 7

Can packs of cigarettes be used as commodity money?

Accepted Answer

We must see whether cigarettes satisfy t...

Question 8

Compared to an economy that uses a medium of exchange, in a barter economy ________.

Accepted Answer

A)  transaction costs are higher
B)  transaction costs are lower
C)  liquidity costs are higher
D)  liquidity costs are lower

Question 9

Of money's three functions, the one that distinguishes money from other assets is its function as a ________.

Accepted Answer

A)  store of value
B)  unit of account
C)  standard of deferred payment
D)  medium of exchange

Question 10

As a store of value, money ________.

Accepted Answer

A)  does not earn interest
B)  cannot be a durable asset
C)  must be currency
D)  is a way of saving for future purchases

Question 11

Since it does not have to be converted into anything else to make purchases, ________ is the most liquid asset.

Accepted Answer

A)  money
B)  stock
C)  artwork
D)  gold

Question 12

During hyperinflations, ________.

Accepted Answer

A)  the value of money rises rapidly
B)  money no longer functions as a good store of value and people may resort to barter transactions on a much larger scale
C)  middle-class savers benefit as prices rise
D)  money's value remains fixed to the price level; that is, if prices double so does the value of money

Question 13

The components of the M1+ monetary aggregate are chequable deposits plus ________.

Accepted Answer

A)  currency
B)  currency plus savings deposits
C)  currency outside banks
D)  currency plus money market deposits

Question 14

Economists say that money is a store of value. since there are other assets that are a more desirable store of money, why do people hold money at all?

Accepted Answer

People hold money although it is not the...

Question 15

When economists say that money promotes ________, they mean that money encourages specialization and the division of labour.

Accepted Answer

A)  bargaining
B)  contracting
C)  efficiency
D)  greed

Question 16

E-cash is used for payments ________.

Accepted Answer

A)  that are always secure
B)  that are very important
C)  on the internet
D)  in any transaction

Question 17

When compared to exchange systems that rely on money, disadvantages of the barter system include ________.

Accepted Answer

A)  the requirement of a double coincidence of wants
B)  lowering the cost of exchanging goods over time
C)  lowering the cost of exchange to those who would specialize
D)  encouraging specialization and the division of labor

Question 18

Which of the following statements best explains how the use of money in an economy increases economic efficiency?

Accepted Answer

A)  Money increases economic efficiency because it is costless to produce.
B)  Money increases economic efficiency because it discourages specialization.
C)  Money increases economic efficiency because it decreases transactions costs.
D)  Money cannot have an effect on economic efficiency.

Question 19

Money is ________.

Accepted Answer

A)  the same as currency
B)  anything that is generally accepted in payment of goods or services or in the repayment of debts
C)  not used as a unit of account
D)  defined as paper money and coins

Question 20

The payments system is ________.

Accepted Answer

A)  the method of conducting transactions in the economy
B)  used by union officials to set salary caps
C)  an illegal method of rewarding contracts
D)  used by your employer to determine salary increases

Exam 3: What Is Money

Compared to an economy that uses a medium of exchange, in a barter economy ________.

Correct AnswerverifiedShow Answer

Can packs of cigarettes be used as commodity money?

Correct AnswerverifiedWe must see whether cigarettes satisfy t...View AnswerShow Answer

When economists say that money promotes ________, they mean that money encourages specialization and the division of labour.

Correct AnswerverifiedShow Answer

When compared to exchange systems that rely on money, disadvantages of the barter system include ________.

Correct AnswerverifiedShow Answer

Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called ________ money.

Correct AnswerverifiedShow Answer

The currency component includes paper money and coins held in ________.

Correct AnswerverifiedShow Answer

The payments system is ________.

Correct AnswerverifiedShow Answer

Since it does not have to be converted into anything else to make purchases, ________ is the most liquid asset.

Correct AnswerverifiedShow Answer

Dennis notices that jackets are on sale for $99. In this case money is functioning as a ________.

Correct AnswerverifiedShow Answer

Introduction of cheques into the payments system reduced the costs of exchanging goods and services. Another advantage of cheques is that ________.

Correct AnswerverifiedShow Answer

Economists say that money is a store of value. since there are other assets that are a more desirable store of money, why do people hold money at all?

Correct AnswerverifiedPeople hold money although it is not the...View AnswerShow Answer

A problem with barter exchange when there are many goods is that in a barter system ________.

Correct AnswerverifiedShow Answer

E-cash is used for payments ________.

Correct AnswerverifiedShow Answer

Which of the following statements best explains how the use of money in an economy increases economic efficiency?

Correct AnswerverifiedShow Answer

Explain the evolution of the payments system. Is the system headed towards a cashless society?

Correct AnswerverifiedSocieties begin with a barter system and...View AnswerShow Answer

During hyperinflations, ________.

Correct AnswerverifiedShow Answer

Money is ________.

Correct AnswerverifiedShow Answer

As a store of value, money ________.

Correct AnswerverifiedShow Answer

The components of the M1+ monetary aggregate are chequable deposits plus ________.

Correct AnswerverifiedShow Answer

Of money's three functions, the one that distinguishes money from other assets is its function as a ________.

Correct AnswerverifiedShow Answer

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We must see whether cigarettes satisfy t...
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People hold money although it is not the...
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Societies begin with a barter system and...
View Answer

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