Question 1

In a barter economy the number of prices in an economy with N goods is

Accepted Answer

A)  [N(N - 1) ]/2.
B)  N(N/2) .
C)  2N.
D)  N(N/2) - 1.

Question 2

The evolution of the payments system from barter to precious metals,then to fiat money,then to checks can best be understood as a consequence of the fact that

Accepted Answer

A)  paper is more costly to produce than precious metals.
B)  precious metals were not generally acceptable.
C)  precious metals were difficult to carry and transport.
D)  paper money is less accepted than checks.

Question 3

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 4

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 5

An important characteristic of the modern payments system has been the rapidly increasing use of

Accepted Answer

A)  checks and decreasing use of currency.
B)  electronic fund transfers.
C)  commodity monies.
D)  fiat money.

Question 6

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

Accepted Answer

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

Question 7

If an individual moves money from a demand deposit account to a money market deposit account,

Accepted Answer

A)  M1 decreases and M2 stays the same.
B)  M1 stays the same and M2 increases.
C)  M1 stays the same and M2 stays the same.
D)  M1 increases and M2 decreases.

Question 8

Money ________ transaction costs,allowing people to specialize in what they do best.

Accepted Answer

A)  reduces
B)  increases
C)  enhances
D)  eliminates

Question 9

A hyperinflation is

Accepted Answer

A)  a period of extreme inflation generally greater than 50% per month.
B)  a period of anxiety caused by rising prices.
C)  an increase in output caused by higher prices.
D)  impossible today because of tighter regulations.

Question 10

Kevin purchasing concert tickets with his debit card is an example of the ________ function of money.

Accepted Answer

A)  medium of exchange
B)  unit of account
C)  store of value
D)  specialization

Question 11

If an individual moves money from a savings deposit account to a money market deposit account,

Accepted Answer

A)  M1 decreases and M2 stays the same.
B)  M1 stays the same and M2 increases.
C)  M1 stays the same and M2 stays the same.
D)  M1 increases and M2 decreases.

Question 12

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 13

If an individual redeems a U.S.savings bond for currency

Accepted Answer

A)  M1 stays the same and M2 decreases.
B)  M1 increases and M2 increases.
C)  M1 increases and M2 stays the same.
D)  M1 stays the same and M2 stays the same.

Question 14

All of the following are necessary criteria for a commodity to function as money except

Accepted Answer

A)  it must deteriorate quickly.
B)  it must be divisible.
C)  it must be easy to carry.
D)  it must be widely accepted.

Question 15

An individual's annual salary is her

Accepted Answer

A)  money.
B)  income.
C)  wealth.
D)  liabilities.

Question 16

When money prices are used to facilitate comparisons of value,money is said to function as a

Accepted Answer

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

Question 17

When paper currency is decreed by governments as legal tender,legally it must be

Accepted Answer

A)  paper currency backed by gold.
B)  a precious metal such as gold or silver.
C)  accepted as payment for debts.
D)  convertible into an electronic payment.

Question 18

Introduction of checks into the payments system reduced the costs of exchanging goods and services.Another advantage of checks 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 check are available for use immediately.

Question 19

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

Accepted Answer

A)  medium of exchange.
B)  unit of account.
C)  store of value.
D)  unit of specialization.

Question 20

________ is used to make purchases while ________ is the total collection of pieces of property that serve to store value.

Accepted Answer

A)  Money; income
B)  Wealth; income
C)  Income; money
D)  Money; wealth

Exam 3: What Is Money

A hyperinflation is

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Kevin purchasing concert tickets with his debit card is an example of the ________ function of money.

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As a store of value,money

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If an individual redeems a U.S.savings bond for currency

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When paper currency is decreed by governments as legal tender,legally it must be

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

Correct AnswerverifiedShow Answer

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

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Money ________ transaction costs,allowing people to specialize in what they do best.

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In a barter economy the number of prices in an economy with N goods is

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________ is used to make purchases while ________ is the total collection of pieces of property that serve to store value.

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

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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

Correct AnswerverifiedShow Answer

All of the following are necessary criteria for a commodity to function as money except

Correct AnswerverifiedShow Answer

The evolution of the payments system from barter to precious metals,then to fiat money,then to checks can best be understood as a consequence of the fact that

Correct AnswerverifiedShow Answer

When money prices are used to facilitate comparisons of value,money is said to function as a

Correct AnswerverifiedShow Answer

An individual's annual salary is her

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During hyperinflations,

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An important characteristic of the modern payments system has been the rapidly increasing use of

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If an individual moves money from a demand deposit account to a money market deposit account,

Correct AnswerverifiedShow Answer

If an individual moves money from a savings deposit account to a money market deposit account,

Correct AnswerverifiedShow Answer

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is used to make purchases while is the total collection of pieces of property that serve to store value.

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