Question 1

Checking deposits at banks are

Accepted Answer

Checking deposits at banks are considered money because they can be easily accessed and used for transactions. They can be withdrawn as cash or used to make purchases electronically through debit cards or checks. The fact that they are insured by the FDIC is a reflection of their status as commonly accepted forms of payment, not the sole reason why they are considered money.

Question 2

Frank spends Saturday afternoon at the Dodge dealership looking at new trucks. The model he is interested in has a sticker price of $29,000. The fact the price is quoted in dollars is an example of money as a

Accepted Answer

The fact that the price is quoted in dollars shows that money is being used as a unit of account, which is one of the functions of money. Money as a store of value and medium of exchange are also functions of money, but they are not demonstrated in this scenario.

Question 3

Which of the following applies to an object serving as a store of value?
I. If an object can be held and exchanged later for a good or service, it serves as a store of value.
II. The less stable an object's value, the better it serves as a store of value.
III. A work of art can serve as a store of value.

Accepted Answer

Option I is correct as an object serving as a store of value can be held and exchanged later for a good or service. Option II is incorrect as the more stable an object's value, the better it serves as a store of value. Option III is correct as works of art are often used as stores of value. Therefore, options I and III are the correct choices.

Question 4

The price of movies is equivalent to 2 six- packs of soda. A six- pack of soda is equivalent to 2
Ice- cream cones. An increase cone is equivalent to 3 packs of jelly beans. What can be said, given this data?

Accepted Answer

Using a unit of account would make this problem much easier.

Question 5

M1 is a measure of

Accepted Answer

M1 is a measure of money and includes both currency and checking deposits.

Question 6

U.S. currency _.

Accepted Answer

U.S. currency is composed of the bills and coins that we use today. M1 and M2 refer to different measures of money supply, but they do not include items such as tobacco. Barter refers to direct exchange of goods and services without using currency, but it is generally considered less efficient than using currency in modern economies.

Question 7

Which of the following correctly completes this statement? Money in the United States includes

Accepted Answer

Money in the United States includes currency (physical money) and bank deposits that are held by the public and not within the banking system itself.

Question 8

In the United States today, money consists of

Accepted Answer

Money in the US consists of both currency (such as bills and coins) and deposits held at banks (such as checking and savings accounts). Both are widely used and accepted as forms of payment.

Question 9

The money aggregate M1 consists of

Accepted Answer

M1 includes the most liquid forms of money such as physical currency in circulation, demand deposits (checking accounts), and other accounts that can be easily converted to cash like traveler's checks. Savings accounts and Treasury bills are not included in M1.

Question 10

Checking deposits are

Accepted Answer

Checking deposits are considered part of the money supply as they are liquid assets that can be used for transactions.

Question 11

Which of the following applies to money when it serves as a store of value?
I. Money is a store of value because it is an agreed measure for stating goods' prices.
II. The more stable money's value, the better it serves as a store of value.
III. When money serves as a store of value, it requires a double coincidence of wants.

Accepted Answer

Option I describes how money serves as a unit of account. Option II correctly states that the more stable the value of money, the better it serves as a store of value. Option III is incorrect; a double coincidence of wants is necessary for barter, not for money to serve as a store of value.

Question 12

Which of the following counts as part of money?

Accepted Answer

Only the money in a checking account is considered a part of the money supply. The other options are considered assets but not part of the money supply.

Question 13

During periods of inflation, which function of money is most severely affected?

Accepted Answer

During periods of inflation, the value of money decreases, meaning it is not a reliable store of value. Therefore, option A) store of value, is the function of money that is most severely affected.

Question 14

Nicholas is saving money collected from his paper route in order to purchase a new bicycle. His saving represents using money as

Accepted Answer

Nicholas is using money as a store of value because he is saving it to purchase a new bicycle in the future, which means he is keeping it until its value is needed. Money can be used as a store of value, unit of account, and medium of exchange, but in this scenario, only the store of value applies.

Question 15

In a world with no money, costs are expressed in terms of other goods. If one video game costs two hamburgers, and a hamburger costs three sodas, how many sodas would it take to buy a video game?

Accepted Answer

One video game costs two hamburgers, and each hamburger costs three sodas. Therefore, one video game costs 2 hamburgers * 3 sodas/hamburger = 6 sodas.

Question 16

Which of the following is an example of using money as a store of value?

Accepted Answer

Using money as a store of value means holding onto it as a means of saving for future purchases or emergencies. Keeping $200 on hand for emergency situations is an example of using money as a store of value.

Question 17

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

Accepted Answer

When you save quarters in a jar for future use, you are using money as a store of value, preserving its value for future transactions.

Question 18

Which of the following is money?

Accepted Answer

The answer of Which of the following is money?
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Question 19

M1 includes

Accepted Answer

M1 includes the most liquid forms of money, which are currency, checking deposits and traveler's checks. Money market mutual funds, stocks and bonds are not included in M1. Option B and D are therefore incorrect. Choice C is a repetition of A, and therefore incorrect as well.

Question 20

When you keep money in a change jar to be used later, what function is it fulfilling?

Accepted Answer

Keeping money in a change jar is fulfilling the function of being a store of value. This means that the money is being saved for later use and is retaining its value until it is needed. It is not being used as a medium of exchange, unit of account, or recording device.

Quiz 8: Money, the Price Level, and Inflation