Deck 15: Money, Banking, and Central Banking

Question 1

To function as money, something must hold its purchasing power over time. That is, it must be a

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

Answer 1

A

Question 2

In a barter system, there are

A) many different units of money.
B) money and goods exchanged for each other.
C) financial institutions to facilitate all exchanges.
D) goods traded directly for other goods and services.

Answer 2

D

Question 3

Money functions as

A) a store of value.
B) an unit of account.
C) a medium of exchange.
D) all of the above.

Answer 3

D

Question 4

A barter arrangement basically means

A) a cashless transaction.
B) a credit deal.
C) buying with an I.O.U.
D) exchanging goods for cash.

Question 5

When money provides a yardstick that allows individuals to compare the relative values of goods and services, it is functioning as a

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

Question 6

When money serves as a standard for comparing values of different things, it is functioning as a

A) store of value.
B) hedge against inflation.
C) standard of deferred payment.
D) unit of accounting.

Question 7

When you buy a hotdog for lunch, you are using money as a

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

Question 8

As a result of money in an economy

A) people are greedier than in a barter economy.
B) people can get rich more quickly with the same amount of goods and services available.
C) transaction costs are higher than would be the case in a barter economy.
D) real Gross Domestic Product (GDP) and economic growth are greater than they would be in a barter economy.

Question 9

The direct exchange of goods and services for other goods and services is known as

A) barter.
B) purchasing power.
C) intermediation.
D) remediation.

Question 10

Which of the following represents a function of money?

A) medium of exchange
B) unit of accounting
C) standard of deferred payment
D) all of the above

Question 11

When money is accepted as payment in a market transaction, it is functioning as a

A) store of value.
B) unit of accounting.
C) medium of exchange.
D) unit of investment.

Question 12

A price tag of $4 for a portable power bank is an example of money as

A) a medium of exchange.
B) a unit of accounting.
C) a store of value.
D) a time deposit.

Question 13

Money is defined as

A) a person's net worth.
B) anything people generally accept in exchange for goods and services.
C) a by product of a barter economy.
D) any financial instrument that is backed by gold.

Question 14

If you save $20,000 for a down payment on a house, you are using money as

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

Question 15

Without an accepted medium of exchange, people

A) have to specialize in one area of production.
B) have to rely on gold or silver in order to exchange goods and services.
C) have to rely on barter in order to exchange goods and services.
D) have to use credit to obtain goods and services.

Question 16

Money as a medium of exchange I. Facilitates the exchange of goods
II) Reduces the incentive to barter

A) I only
B) II only
C) Both I and II
D) Neither I nor II

Question 17

The use of money as a medium of exchange I. lowers transaction costs.
II) permits more specialization.

A) I only
B) II only
C) Neither I nor II
D) Both I and II

Question 18

A barter arrangement simply means

A) a direct exchange of goods without the use of money.
B) a promise to pay in the future.
C) that gold must be offered from one party.
D) the government has to facilitate the exchange.

Question 19

For barter to occur there must be

A) no markets for people to exchange goods.
B) a double coincidence of wants for each good to be exchanged.
C) one person who pays cash.
D) services in exchange for goods.

Question 20

Which of the following statements does NOT describe a function of money?

A) a store of value
B) a hedge against inflation
C) a standard of deferred payment
D) a unit of accounting

Question 21

When you set aside the money you have today in order to purchase goods and services later on, you are using money as a

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

Question 22

As a unit of account, money is used

A) to define prices of all other goods.
B) to pay off future debts.
C) to hold purchasing power over time.
D) to exchange for goods and services.

Question 23

The most important function of money is when money is used as a

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

Question 24

One of the benefits of money as a medium of exchange is that

A) it allows for private transactions such as trading vegetables for medical services.
B) it allows individuals to compare the relative value of goods.
C) over time it will become more valuable so that individuals can purchase more goods and services.
D) it allows for specialization that leads to economic efficiencies.

Question 25

A medium of exchange is

A) any asset that sellers will accept as payment.
B) a measure by which prices are expressed.
C) an asset that is used to settle future debts.
D) the thing traded when barter takes place.

Question 26

Which function of money allows people to specialize in areas in which they have a comparative advantage?

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

Question 27

Any asset that sellers will accept as payment is a(n)

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

Question 28

A measure by which prices are expressed is a(n)

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

Question 29

Which of the following statements is NOT true about money?

A) Anything that serves as a medium of exchange, as a unit of accounting, as a store of value, and as a standard of deferred payment can be called money.
B) Money is any medium that is universally accepted by sellers and creditors.
C) Money is a standard of deferred payment.
D) Money can only be coins and paper.

Question 30

In economics, money is

A) another term for income.
B) a financial instrument backed by some precious metal such as gold or silver.
C) anything that people generally accept in exchange for goods and services.
D) whatever the government defines it to be.

Question 31

The function of money that allows individuals a method to compare the relative value of goods and services is

A) medium of exchange.
B) unit of accounting.
C) store of value.
D) liquidity.

Question 32

Compared to a barter economy, an economy that uses money will

A) be greedier.
B) be poorer.
C) have more corruption.
D) have more output.

Question 33

For something to serve as money, it must be

A) backed by the authority of the government.
B) generally accepted by buyers and sellers.
C) light, durable, and common.
D) convertible to gold.

Question 34

The function of money as a store of value diminishes if

A) prices of goods and services increase.
B) interest rates increase.
C) people begin to barter.
D) money is no longer backed by gold.

Question 35

Which of the following is NOT one of the functions of money?

A) medium of exchange
B) protection from increases in prices of goods and services
C) unit of accounting
D) store of value

Question 36

The direct exchange of goods and services for other goods and services without the use of money is

A) a standard of deferred payment.
B) barter.
C) a store of value.
D) financial intermediaries.

Question 37

Which of the following is NOT a benefit of money when used as a medium of exchange?

A) allowing individuals to specialize
B) allowing individuals to pay off debts
C) allowing for some economic efficiencies
D) providing economic growth

Question 38

Without an accepted medium of exchange

A) there would be no trade.
B) people would have to rely on gold or silver in order to exchange goods and services.
C) goods and services would be exchanged by barter.
D) prices are very difficult to determine.

Question 39

The direct exchange of goods and services for other goods and services is known as

A) primitive trade.
B) nonmarket trade.
C) barter.
D) purchasing power parity.

Question 40

To be accepted as money, an item must perform all of the following functions EXCEPT

A) serve as a store of value.
B) be easily reproduced.
C) be a medium of exchange.
D) serve as a standard of deferred payment.

Question 41

A property of an asset that makes it desirable for use as a means of settling debts maturing in the future is a(n)

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

Question 42

If lenders refuse to state the debt in terms of dollars, then dollars are NOT a

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

Question 43

Cigarettes served as money in some prisoner of war (POW) camps during World War II. Given this, we would expect to observe

A) no one ever smoking a cigarette.
B) people usually resorting to barter rather than using cigarettes as money.
C) prices of other goods expressed in terms of cigarettes.
D) only government-issued cigarettes being accepted as money.

Question 44

Which term below fits closest to money functioning as a unit of accounting?

A) medium of exchange
B) adverse selection
C) standard of value
D) liquidity

Question 45

The advantage of holding money as an asset is that

A) money earns interest.
B) money is liquid.
C) money is safe from thievery.
D) the value of money appreciates over time.

Question 46

Money that we have today can be set aside to purchase things in the future. This function of money is known as

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

Question 47

Which function of money allows for comparison shopping?

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

Question 48

If something is to serve as money it must be a store of value. This means that it must

A) be divisible.
B) be the standard by which all goods are compared in setting prices.
C) hold its purchasing power over time.
D) be liquid.

Question 49

The function of money that provides for a commonly recognized measure of value for the price system is a(n)

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

Question 50

The ability of an asset to hold its value over time is a(n)

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

Question 51

If something serves as a store of value, we expect it to be

A) divisible.
B) durable.
C) of intrinsic value.
D) light.

Question 52

What characteristic defines something as money?

A) assets declared by the government to be of value
B) a medium of exchange widely accepted in an economy
C) notes you can deposit in a savings account
D) an asset that earns interest

Question 53

The requirement for a double coincidence of wants occurs when

A) there is inflation.
B) there is deflation.
C) a system of barter is used.
D) the medium of exchange is liquid.

Question 54

Money serves as a medium of exchange means that

A) it benefits both buyers and sellers.
B) it reduces transaction costs.
C) it eliminates the need for barter.
D) All of the above are correct.

Question 55

The existence of money in an economy promotes efficiency by

A) creating an equal distribution of income.
B) creating incentives to be self-sufficient.
C) facilitating trade, thereby allowing for greater specialization.
D) allowing for the formation of corporations as legal entities.

Question 56

When money serves as a store of value, it allows you to

A) transfer wealth into the future.
B) eliminate a double coincidence of wants.
C) be an effective negotiator.
D) find good bargains.

Question 57

Money serves as a standard of value, which is another way of saying that money functions as

A) a medium of exchange.
B) a unit of accounting.
C) an opportunity cost of investment.
D) standard of deferred payment.

Question 58

Money provides a way to transfer wealth into the future. This function of money is known as

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

Question 59

Camels have been used as money. Which function of money would this type of money perform least well?

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

Question 60

The property of money that allows for the settling of debts that mature in the future is

A) liquidity.
B) acceptability.
C) store of value.
D) standard of deferred payment.

Question 61

When Jack and Jill use dollars to compare the market values of their cellphones, money is acting as a

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

Question 62

The direct exchange of one good or service for another is called

A) a token exchange.
B) a standard of deferred payment.
C) the exchange of purchasing power.
D) barter.

Question 63

Giving the store clerk a $10 bill for a portable power bank priced at $10 is an example of money serving as a

A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred value.

Question 64

You go to work today, but will get your paycheck at the end of the month. This is an example of money serving as a

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

Question 65

If a friend of yours keeps cash hidden under the mattress, he is using money as a

A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred value.

Question 66

A monetary system is preferable over the barter system because it

A) reduces transaction costs.
B) is easier to track by the government.
C) limits cash leakages.
D) is determined by the Congress.

Question 67

The degree to which an asset can be acquired or disposed of without much loss of nominal value or transaction costs is known as

A) fiat money.
B) liquidity.
C) fiducia.
D) credit.

Question 68

If Maria buys a latte at Starbucks, her money serves as a

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

Question 69

Which of the following is NOT a function of money?

A) medium of exchange
B) form of credit
C) store of value
D) standard of deferred payment

Question 70

A $200 price tag on a handbag in a department store is an example of money serving as a

A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred value.

Question 71

Suppose you are offered a concert ticket in exchange for four hours of your work in your friend's garden. This is an example of

A) money as a medium of exchange.
B) money as a store of value.
C) barter.
D) money as a standard of deferred payment.

Question 72

When Howie puts money under his mattress for purchases later on, money is acting as a

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

Question 73

For barter to occur there has to be

A) a commodity to serve as a medium of exchange.
B) a formal market where prices are quoted.
C) a double coincidence of wants.
D) a single coincidence of wants.

Question 74

Given the list of assets below, which is the most liquid?

A) $500 worth of Google common stock
B) $500 worth of General Motors bonds
C) A $500 travelers check
D) A bitcoin that is accepted by some stores

Question 75

The price tag on an Under Armour shirt illustrates how money performs the function of a

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

Question 76

Which of the following is NOT a function of money?

A) medium of stored value
B) standard of deferred payment
C) unit of accounting
D) store of value

Question 77

Suppose you pay $450.00 for a new tablet device. This is an example of

A) money as a medium of exchange.
B) money as a store of value.
C) barter.
D) money as a standard of deferred payment.

Question 78

A monetary system is preferable over the barter system because of the problems associated with

A) cash leakages.
B) the double coincidence of wants.
C) the law of diminishing marginal utility.
D) the law of increasing relative costs.

Question 79

Perishable goods such as tomatoes and eggs are never used as money, because they cannot function as a

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

Question 80

When a consumer compared the price of a tablet with the price of a laptop, she discovered the laptop was more expensive. This is an example of using money as

A) a store of value.
B) a medium of exchange.
C) a unit of accounting.
D) a standard of deferred payment.